UTIL Utilities Weekly Chart for Cyclical Forecasting

Utilities are a very useful market cyclical signal. As long as the utes are in a weekly uptrend, defined by the weekly closing price continually exceeding the weekly close 15 weeks prior, the broad indexes are in a strong rally mode. Once the weekly uptrend ends, there is trouble ahead for markets. When utilities lead lower with a weekly trend reversal to the downside, this portends bad things for the broad indexes. The utes lost their weekly uptrend during the August 2011 crash and also the October 2012 market top but both moves were more coincidental with the broad markets selling off rather than leading lower.

A second part to using the utes as an indicator is the 50-week MA cross. If utilities are in both a weekly downtrend, and also drop under the 50-week MA, equity markets are dropping in force. The August 2011 crash resulted in the 50-week MA failure but it was very brief and once price recovered above the 50-week MA that signaled a recovery on tap. Ditto the January 2013 move above the 50 and also the move above three weeks ago. In recent weeks, the utilities peaked and rolled over in late April ahead of the broad market swoon which is a very negative signal. Then the 50-week MA failure occurred but it was short-lived and the move above the 50 created the buoyancy and start of the market rally higher ever since.

This places markets at an interesting juncture, between Heaven and H*ll. The closing price 15 weeks ago was 523 (purple circle) so as long as UTIL stays under 523 this week, the bears are content since the weekly downtrend continues. At the same time, the bulls are happy since they are above the 50-week MA at 481. One of these sides will flinch and clearly tell you the market direction forward; bulls need 523+ and bears need 481-. Note that for next week, the 15-week look-back comparison number is even higher at 528-ish, then the week after higher again at 532-ish, and again the week after that at 529-ish, then a drop down to 514-ish. Thus, the market bears have a window of about three weeks where they either send the broad markets lower, where UTIL will drop back under the 50-week MA, and equities will be selling off in force, or, the bulls will jam utilities higher, if not above 523 this week, then above 528 the following week. The path lower appears far easier but you never know in trading. A 62% Fibonacci retracement from the peak down to the June low shows a target if 508-509 and price is very near there now, so the bulls will likely win the game above 509 and bears will likely win under the current 506 print. For this week, watch 523 and 481. If UTIL stays between unable to choose a side, then the same game continues for next week with 528-ish and 482-ish upper and lower thresholds, respectively. Higher 10-year Treasury yields will push utilities lower while yields dropping will create buoyancy in UTIL. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.