It is interesting how the utilities and broad stock market have been moving inversely for the last few months. It is not unexpected. Utes were always called the widows and orphans sector because it was safer but the data center buildup changes the landscape. Nonetheless, despite the new AI age, that feels a lot like it always did despite artificial intelligence in its fourth breakout year, traders still view utes as a flight to safety if the stock market gets into trouble.
The big picture shows utilities rallying from the start of this year until the end of March and early April. The SPX tumbles lower during this period and that is the bottom where stocks rally from April to the start of June. The utilities sell off while the stock market rallies into June. From the June stock market top until now, at the end of the month, utilities are rallying and stocks are soggy. Will this continue spelling trouble ahead for stocks?
You can see how the SPX is overextended above the 20-day MA above the 50 above the 100 above the 150 above the 200 so a mean reversion lower is desperately needed. The same behavior occurred during the top earlier this year. The 150-day MA continues sloping higher indicating that the stock market remains in a cyclical bull market pattern. Trouble is at hand when the 150 flattens and then rolls over. This was occurring in the springtime but of course, the stock market was stick-saved early April. The wealthy must protect their money.
The XLP and XLY ETF's provide insight into the new America, the New Gilded Age, a la the 1920's. The US is the land of the have's and have-not's. The middle class was eliminated starting with Ronnie Ray-gun busting the unions in the 1980's and sending the middle class jobs overseas to take advantage of the slave labor. This sent stock prices to the moon (lower expenses) making the wealthy filthy rich but gutting America's middle class that lost their jobs and did not benefit from the stock rallies since they did not own stock. The jobs that built the middle class neighborhoods are now gone creating the moral decay in society.
The US population of 330 million consists of 30 million rich folks at the top, the wealthy elite and the upper middle class sycophants that service the elite (they live in McMansions), that control the rigged US crony capitalism game. The remaining 300 million common people, the peons, the have-not's, at the bottom are struggling to pay their bills and survive each month. They are wiped out by the cost of gasoline and food.
The wealthy class, that were then further enriched by the Federal Reserve's money printing during the last two decades, are wondering why everyone is so glum (the Fed's easy money monetary stimulus for over 20 years flows into the stock market boosting prices higher making the wealthy class, that own stocks, more filthy rich, while one-half of Americans, that do not own a single share of stock, are shafted again receiving no benefit; the piggish shame is that the Fed knows this occurs and does it anyway since these corrupt public servants are paid off with lucrative speaking engagements, sponsored by the Wall Street banksters, once they leave office; are you starting to understand crony capitalism filth?).
Capitalism does not exist. It is only referenced in theoretical business text books but never exists in practice due to human greed (corruption) and non-transparency. Bailing out banks, not allowing businesses to go bankrupt, printing money, and federal, state and local governments handing out contracts to relatives and friends is not capitalism; it is the opposite of capitalism. It is called crony capitalism filth. Be glad it is in its last throes. What is the point to any of it when you realize capitalism does not exist? There is none.
Isn't it interesting that no matter what the government system is, be it communism, crony capitalism, socialism, Fascism, Marxism, dictatorships, etc..., there is always 3% to 12% of the country's elite that control the remainder of the population at the bottom. China is 90 million CCP dirtbags that control the 1.4 billion population that is 7% at the top and 93% Chinese folks at the bottom. Iran is in the news nowadays. That is 90 million people with 10 million controlling the other 80 million so that is 11% radical Islamist nutcases controlling the 89% of Iranian folks. America is 30 million at the top and 300 million at the bottom so that is 9% at the top controlling the 91% of have-not's at the bottom. This pattern repeats over and over around the world.
The governments and country systems continue until they are brought down by revolution, mainly led by the younger population, or they collapse due to to corruption. They can also collapse due to famine or disease. Inflation that drives food costs higher and creates riots and social unrest can also bring governments down that is how Chinese dynasties crumbled. People have to eat and they need water to drink. No government has ever stood the test of time. If that was the case, we would all be speaking ancient Sumerian and Akkadian. Even Rome, that stretched a few centuries, had about 40 different government structures within that time. All government systems fail eventually due to corruption or other reasons. The greed and corruption occurs since the thievery, grift and graft is hidden from prying eyes (non-transparency).
The beauty of America was the middle class. It was the fabric and glue that held the country together and found ways to bridge the gap between rich and poor and make it all work. Not anymore. That is gonzo. No one even talks like this anymore. There is only rich and poor now similar to the 1970's and 1980's but far more orders of magnitude worse. The computer age developed through the 1990's and 2000's, helping to keep the crony capitalism system afloat (enough of the mass population was working and making money again), but that is in the rearview mirror in 2026. Human greed destroys everything over time as it has for 5,000 years; nothing will ever change that. Human greed knows no bounds.
Anyhoo, the spending by the wealthy helps prevent the US from falling into an overall recession even though manufacturing, housing and labor sectors remain weak and recessionary. The XLY is consumer discretionary spending. Mainly wealthy folks are buying mink coats, jewelry, fancy cars, taking airline trips, staying in ritzy hotels, wining and dining at fine food establishments, buying motorcycles, and boats, living the good life. The XLY behavior reflects the SPX. As utilities rise with traders growing cautious, the broad stock market is sold off especially the consumer discretionary stocks. If bad times are coming, even the wealthy will pull back on spending. Only the Lonely. Roy was great.
Conversely, the XLP is consumer staples spending. Regardless of good times or bad, everyone needs toilet paper to wipe their fat arses, soap, detergent, paper towels, diapers, hygiene products, etc... PG was always a consumer staples darling. Every time there was a whiff of a recession, everyone ran to buy PG. As would be expected, XLP moves the opposite of XLY. As stocks fall, traders seek safety in consumer staples. Healthcare holds up in bad times since everyone is sick because they lost their jobs.
Utilities take off higher last week without looking back. Consumer staples catch a bid in June but hesitate at the breakout level. The SPX breaks down, ditto consumer discretionary, but it is hesitating at its breakdown level. The market has to make a decision this week.
If utilities and stocks begin moving down together, that spells serious carnage ahead including a potential crash scenario. The bulls goosed the utes last week taking this scenario off the table but it can appear again especially if things begin falling apart. 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.
