This simple math points to Dow 21,700: Analyst

What will power the Dow?

The Dow Jones Industrial Average hit yet another all-time closing high on Monday, marking the fifth record close for 2015. And according to Cornerstone Macro's head of technical analysis, Carter Worth, one simple equation could signal another 3,000 points to the upside for the blue chips.

It all has to do with the Dow's price-to-earnings ratio, or P/E, relative to that of the S&P 500, Worth said.

On CNBC's "Fast Money" on Monday, Worth laid out his case for another big leg higher in the Dow by pointing out that the index is inexpensive relative to the S&P 500.

"We know that the S&P is trading at 18.8 times and the Dow is trading at 15.8 times," he said, marking a 3-point differential between the P/E ratios of the Dow and S&P 500. "If you were just to put an S&P multiple on to the Dow, you're talking about 21,700."

Optimize Advisors President and Chief Strategist Mike Khouw found data consistent with the trend that Worth highlighted.

"Looking back a couple decades, when the spread between the price to earnings ratio of the S&P and Dow was 3.5 or higher, the Dow has averaged returns 40 basis points higher than the S&P 500 over the following 90 days." On the flip side, Khouw said, when the two indices traded at parity or when the Dow was more expensive on a P/E basis, it tended to underperform the S&P 500 by a similar margin.

Worth identified three stocks that could help lead the Dow higher.

One of those stocks was Goldman Sachs, the Dow's most heavily weighted company, which Worth said has "already started to break out." Goldman Sachs is outperforming the market year-to-date and is up around 30 percent in the past 52 weeks. Worth said the stock's chart looks very similar to that of the Dow, and he expected the stock to move another 10 percent higher.

United Technologies could also lead the Dow higher in the near future, Worth said. "It's been a laggard this year," he said, but "the presumption is that we in fact break out and exceed the $120 level."

Finally, Worth named tech behemoth Apple as another key driver for the Dow's going forward. "It's just a stay long, be long momentum kind of trade," he said. Worth said the chart's technical levels are setting up for another new high.

When asked whether it's possible that the S&P is in fact expensive and should really be trading at a multiple closer to that of the Dow, Worth pointed to the lagging performance of "super-cap" names over the "better part of the last three years." That trend, he said, is now starting to change.

"If one looks at the relative performance of the largest stocks in the S&P 500, they have started to outperform," he said. "We think that continues, and lends credence to being long the Dow relative to the S&P."