Saturday, January 30, 2016

UTIL Utilities Weekly Chart Sideways Channel Breakout

The weakness in the utilities over the last few months was a dire indicator for the broad stock market and stocks did fall down the rabbit hole. The outperforming sector last week was the utes catapulting +4% higher above 600. The indicators are long and strong wanting more price highs after any pull back in this weekly time frame although the money flow is not impressed and is trying to create the initial pull back from the big run higher during the last 7 weeks.

Utilities moving higher is a bullish sign for stocks in this weekly time frame say for the next couple months or so into the April-May period. This is interesting since many market participants were ready to slit their wrists last week and continue to predict a huge drop in stocks at anytime. Usually the consensus is always going the wrong way. The television pundits told Ma and Pa Kettle to buy stocks over the last 18 months and now they have lost -10% to -30% of their money. Pa is eating franks and beans while Ma is huddled in the corner at the cast iron potbelly stove burning newspaper advertisements to keep warm.

The 15-week closing price is key since it determines if utes are in a weekly uptrend or downtrend and this influences broad stock market direction. The new week ahead compares back to the purple circle. Last week, price took out the 597 level creating a weekly uptrend for utilities which is market positive going forward. Price would need to drop under 594.41 to create a negative market signal. If UTIL then falls under the 50-week MA at 578, a stock market crash is on the table. At the least, if 578 fails, the SPX would be expected to drop from 20 to 40 handles in very quick order (a couple hours). The blue circle is the comparison number for the week of 2/8/16 which is 580.50 that will replace the 594.41 in importance.

Thus, providing fresh bear meat for those short the market, bears want UTIL under 594 this week which will create market selling then under 578 stocks will fall into a dramatic collapse. Or, for the week of 2/8, the market bears need UTIL to fall below the 578-580 level which would open a trap-door in the stock market creating carnage.

On the bull side, price simply has to stay at current levels and float sideways or higher and this will help the stock market bulls on a weekly basis going forward. 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.

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