UTIL Utilities Weekly Chart; Three Black Crows; Sideways Symmetrical Triangle

The S&P 500 is at all-time record highs above 3.5K on Friday, having only passed 3.4K on Monday. Federal Reserve Chairman Powell is pumping like a madman promising to maintain easy money policies for years forward. It is sick. As this topping-out drama takes place, the utilities are the most important sector impacting both the short-term (hours, days a few weeks) and intermediate term (weeks and months into year-end).

All the major and minor sectors are running joyfully higher as the stock market prints record highs except for one; utes (UTIL or DJU; you can monitor the utility sector with XLU). Utilities are extremely important but when is the last time you heard a talking head on television or some bonehead on the internet mention utilities?

Utilities print the three black crows candlestick formation. That's not good. UTIL enjoyed a six-week rally through July but the for the last three weeks, down, down, down. For the candlesticks, the opening price is above the previous low and then finishes lower. Three down candlesticks are three black crows that signal a trend change from bullish to bearish (confirmation).

Two key metrics are in play for utes which are a useful tool for forecasting a stock market selloff and the intensity of a drop. As long as utilities are in a weekly uptrend, based on the closing price 15 weeks ago, and above the 50-week MA, now at 834, all's right with the stock market and an uptrend is the direction for stocks. When either parameter turns bearish, a sogginess appears in the stock market. If both parameters are negative, there is trouble ahead for the stock market that will last through the intermediate term.

UTIL begins the week at 801 so the bulls have their work cut out for them to push price above 834. Considering the new all-time highs for the stock market, UTIL should be at 840, 850 and higher, but oddly, it's not. This tells you that something may be wrong under the surface.

Utilities typically peak and roll over either two months in front of a major selloff in the stock market or coincidentally with the stock market or anywhere in between (a zero to 8-week heads-up signal that the stock market is about to go down hard). The three black crows are three weeks now that utes are heading down. This behavior is currently telling you that the stock market may be in trouble and quickly running out of time.

The 50-week MA parameter is bearish for stocks but it does not seem to matter these days with Pope Powell pumping equities. The 15-week lookback is extremely interesting. The weekly trend comparison number for this week is 763.93 (purple circle) so price is 36 points above and the bulls feel good about that. For the start of this week, UTIL is at 801 with happy bulls wanting 834 and happy bears wanting 764. Utilities will pivot in one direction or the other and that in itself will be important.

It is a safe bet that UTIL likely remains above 764 this week. However, the following week, after the Labor Day holiday when markets are closed, 9/8 thru 9/11, the lookback comparison number is 806.92 (the brown circle; the 764 number will no longer matter). Thus, the bulls must push UTIL above 807 this week by Friday at 4 PM EST, otherwise, there will be Hell to pay in the stock market come 9/8.

The chart shows that sideways symmetrical triangle pattern. The indicators are lined out sideways like the moving average so everyone is standing around waiting to see which way she breaks. Price is directly at the apex of that blue triangle and must decide which way to go. The vertical side of the triangle is from 7 hundo to 9 hundo so the difference is 2 hundo. Thus, if bulls win, price breaks out from 820 and targets 1020. If bears win, price breaks down from 790 and targets 590.

If UTIL rallies this week, remaining above 800 and overtaking 807 and finishing the week above 807, the bulls and the broad stock market are fine and will continue along in an elevated manner. If UTIL slips below 8 hundo and remains below, you should become very concerned. If UTIL falls below 764 this week it is lights-out for the stock market. If UTIL loses 807 the following week (Labor Day week), the stock market will be selling off and in trouble. If UTIL falls below 750 this week or next, or at anytime over the next 6 weeks, there is a high likelihood that the broad stock market will crash or at a minimum trail significantly lower into year-end. Watch the utes closely this week. They will tell you a lot. 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.