Utilities Breakdown 8-4-11

The utilities typically lead the broad markets down by days or weeks in front of a substantial sell off.  Oddly, the utes have been bull friendly for many months so they did not lead this ongoing sell off in the broad markets currently.

But, today the utes broke down.  For the utilities, watch UTIL, and the 15-week lookback period as described in the excellent technical book Stock Market Logic by Norman G. Fosback.  The utes have maintained their uptrend week after week, but an hour ago, UTIL violated the 15-week lookback weekly close at 418.37.  Last print on UTIL is 417.81.  LOD is 416.43.

This violation today of the multi-week uptrend in utilities forecasts trouble ahead for broad markets.  The utes indicator is a two step process.  The first step is violated as described.  Part two is to see if price loses the 50 week MA.  If so, then the broad markets typically go into free fall within minutes.  Think of the UTIL 50 week MA as a trap door for equities.

UTIL 50 week MA is now 413.35.  If this level holds, the broad markets should stabilize and recover.  If 413.35 fails, markets are headed for a major blood bath. Current look is that the utes will hold here but continue to watch UTIL 418.37 and 413.35 like a hawk today and tomorrow.

Since the utes did not lead this downtrend in the broad markets, the door has to remain open to the broad markets recovering and heading back up to allow the utes time to set up to lead down in the days and weeks ahead. But, at this juncture today, if the UTIL 50 week MA is lost, it's all over for the broad markets.