UTIL Utilities Weekly Chart; Weekly Downtrend; 50-Week MA Failure; Utilities Collapse Into -10% Correction

In all the stock market hoopla last week, the euphoric party atmosphere, no one noticed the utilities crashing. It is remarkable that a major stock index such as the utilities, is down -10% off its top, in correction (-10% is a correction and a drop of -20% off the peak is a bear market), while the broad stock indexes are printing all-time record highs. It is a head-scratcher. It is nonsensical.

Utilities are dropping as concern increases over rising rates. Other interest-rate sensitive sectors such as telecom and REIT's trade soft. The key things to follow is the weekly trend in UTIL based on the price from 15 weeks ago and also the very important 50-week MA.

The utes went into a weekly downtrend a couple weeks ago which was the first sign of potential trouble. Price fell to the critical 50-week MA then spent one week sitting there looking at the view, then last week crashed below. The indicators remain weak and bleak although the stochastics are oversold and agreeable to a dead-cat bounce now. More downside would be expected after a quick relief rally. Those rising wedge patterns are ominous and you can see the tragic aftermath.

The failure of the 50-week MA is an extremely negative development for the broad stock market but instead everyone yawns. No one cares since they are too busy buying stocks. That roll over in 2016 let to the August 2016 market top. The S&P 500 trended lower from August to October in 2016 dropping about 110 SPX handles. UTIL recovered as 2017 started and the stock market was off to the races again. The utes then maintained a trend of higher highs and higher lows for 2017 so the weekly trend was higher and price was well above the 50-week MA. Traders drink Fed wine each day buying stocks enthusiastically.

UTIL spiked to 780 in November, then you see a little lull for a week, then price came up for another high at 772-ish. That was the peak, say at the start of November. Utilities then crash over the last five weeks. Taking 10% off the 780 top is 78 points which is a 702 level. 10% off that 772 level would be 695. Price is at 700 and printed down to 696 on Friday. Utilities are in a -10% correction. Will it last? We will find out this week.

Utilities typically roll over ahead of the broad stock market when major tops are placed. The broad market typically follows the utes either coincidentally (at the same time) or up to 2 months. Utes rolled over starting November so you would expect the broad stock market to roll over in this November-December-January window, however, the indexes print new all-time highs. Hence, the action is head-scratching and nonsensical. It is no biggie to have a sector or few lagging the broad market, or perhaps a sector in a correction, but the severe divergence between utes crashing and the stock market record highs will get your attention. One of them has to be wrong. Either the utes are going to rally like a banshee or the stock market should top out and roll over.

UTIL 50-week MA is at 720.53 and may be the most important number for the stock market in the week ahead. If UTIL remains below the 50, bad things would be expected to happen to the stock market going forward. 

UTIL closed at 723.60 fifteen weeks ago. As long as UTIL remains under 723.60, the utes remain in a weekly downtrend which continues to portend bad things for the stock market. If UTIL crosses above the 720.53 and 723.60 this week, the stock market may go into a melt-up mania phase. It is likely a binary outcome as it plays out. Either the utes are proven correct and the stock market begins dropping like a stone and will remain soggy all year long or the broad stock market is proven correct with the utes putting in a V bottom and spiking higher leading to more euphoric bullish joy for equities ahead.

Keystone highlighted the utilities back in early 2015 and it was one of the verification tools to help call the major stock market top for May 2015, which occurred. The stock market was likely heading into the abyss back then as 2016 started, but the Federal Reserve and other global central bankers stepped in to save the day as usual; that was explained at the time in February 2016 with the Tweezer Bottom.

It is fascinating to see the utes roll over and the stock market print new all-time highs; it is analogous to the sun shining but at the same time rain is falling. The utes are telling you to be very worried but instead everyone is partying like its 1999. The weeks ahead will be interesting and perhaps epic. 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.