Caterpillar and Boeing's next moves may determine the Dow's future, technician says

Boeing and Caterpillar are the best-performing Dow components during the last year. But they've declined in recent sessions amid broader market turmoil, and one top technician is watching both stocks for clues as to the market's next move.

Both stocks represent about 14 percent of the Dow, pointed out Craig Johnson, chief market technician at Piper Jaffray. Both have the potential to fall further given the recent bearish price action, and that has implications for the broader market, he said. Here are his reasons.

• Boeing and Caterpillar have soared a respective 88 percent and 55 percent in the last year, but have fallen 3 percent and nearly 10 percent, respectively, over the past week amid several volatile sessions.

• Boeing has been a "parabolic" stock, and it appears that profit-taking has finally come in. The stock has corrected nearly into its 50-day moving average, and may correct into its 200-day moving average if that technical marker is breached to the downside.

• When it comes to shares of Caterpillar, the stock recently put in a "lower high" on the chart, and is now down 7 percent in 2018. The stock has logged four-straight days of losses, through Friday, and may correct into its 200-day moving average.

• In turn, a further decline in Caterpillar shares may prompt more profit-taking in other industrial names.

Bottom line: What Boeing and Caterpillar shares do next may hold clues to the market's future, according to Piper Jaffray's Craig Johnson.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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