UTIL Utilities Weekly Chart; Weekly Downtrend Begins; 50-Week MA Failure Would Be Ominous Signal for the Stock Market

Light volume and calm trading is expected on this last day of trading before Christmas weekend. However, an ominous signal occurs for markets in yesterday’s trading. Utilities are in free fall. PCG crashed -13% and EIX -7.3%. SCG -10%. UTIL is testing its 50-week MA at 718.32. The LOD yesterday was 714.57 rupturing the 50-week. UTIL ends the day at 719.23 above the 50.

The UTIL 50-week MA is typically a trap-door signal for the broad stock market. The seasonality joy, tax bill euphoria and government spending bill create the short-term market happiness trying to keep stocks elevated into the holiday weekend. The collapse in utes is extremely serious. Many trading algorithms, such as the Keybot the Quant algo, have the UTIL 50-week MA programmed into the models so a failure of this parameter can lead to a free fall in the stock market.

Keystone has not yet called the top in the stock market this year because the utilities have not rolled over. Now they are. The utes typically roll over coincidentally or up to 2 months ahead of the broad stock market when a major stock market top prints. Thus, exercise caution in all trading going forward. The rising wedge pattern is ominous and looking at the drop you can see why Keystone always says the collapses from rising wedges can be quite dramatic.

The other significant development in the chart is that utilities have now fallen into a weekly downtrend which is a bad signal for the stock market. Count 15 weeks back with the candlesticks and that price determines if the current week is above or below and thus if the weekly trend in utes is higher or lower. This is old-time technical analysis that only the old-timer's understand. This week, utes fell through the level shown for the candlestick before the blue circle. Next week, the comparison number is the blue circle so utes remain in a weekly downtrend as long as price stays below the blue circle.

Even more important and concerning, is that UTIL collapsed lower below the 15-week lookback comparison number for the first two weeks of the new year shown by the brown circle. If price stays below there, utes will remain in a weekly downtrend for the foreseeable future and there is likely serious trouble coming very fast for the US stock market.

With today the last day of trading before the Christmas weekend, a market event may not occur, however, considering the low trading volume expected, if UTIL fails through the 718 level, a stock market collapse would be firmly on the table. This situation remains in play next week and into the new year. Watch the UTIL 50-week MA at 718 like a hawk since it tells you a lot about the direction of the stock market ahead. If the UTIL 50-week MA fails, the stock market may go into free fall.

Watch the UTIL 718 level at the opening bell this morning; it is for all the marbles. Will price bounce, or die? 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.

Note Added at 12:43 PM EST: It is lunchtime in the States on the East Coast, and UTIL is at 720.70 with the 50-week MA at 718.35. LOD 720.34. The devil is dancing on the head of a pin. Stocks are maintaining buoyancy since the trap-door at UTIL 718 did not open; yet. SPX 2680. INDU 24730. COMPQ 6950. RUT 1544. VIX 9.89. Market bears do not have any hope with the VIX below 10. The drama continues.

Note Added Saturday, 12/23/17: The bulls win the game on Friday keeping UTIL above the 50-week MA. This saga continues next week and into next year.