Challenger’s Latest Report Will Cost CAT Another -8.3%

Caterpillar (CAT – NYSE)

Thursday, September 05, 2013

According to our favorite employment consultant, Challenger, Gray & Christmas, August planned layoffs surged to their highest peak in the past six months: “Employers announced 50,462 layoffs last month, up 33.8 percent from 37,701 in July. Heavy job cuts in the industrial goods sector are never a good thing, as they can be indicative of widening cracks in the economy’s foundation. However, the August surge in industrial goods job cuts was driven largely by falling global demand for mining equipment.” (Emphasis added.)

Cowen’s Adam Graf and Misha Levental confirm this forecast: “We believe that, should gold price remain at current levels, mining companies will continue to reduce costs, primarily on the operating side, in efforts to restore margins and shore up balance sheets. While there may not be as much room to maneuver with respect to capital costs, miners will continue to rejigger mine plans pushing back capital expenditures and forward higher grades.” (Again, our emphasis.)

CAT 090513

Bottarelli Research Tip: When you’re talking global mining equipment, you are talking Caterpillar (CAT – NYSE), which touched its “Red Zone” for the eighth time in the past 14 months. The previous seven touches resulted in median losses of -10.70%. So far, CAT has only lost some -6.9% this time around. A similar loss now would see CAT fade down to $78.49. But this year, CAT is in a slide marked by a 4x Sell Signal Stack and a Death Cross, so we’re willing to posit that CAT’s slide will extend to the 100% retracement marker at $76.21 for an -8.3% net loss from current price.

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