UTIL Utilities Weekly Chart Critical 439 and 453 Levels

The weakness in the utilities thus far this year is ominous. We watched the red wedge form with overbot conditions and the negative divergence shown by the red lines, which created the spankdown that SDP (the inverse utility ETF) enjoyed.

The trading old-timers like good ole Keystone use the 15-week look-back to gauge broad market direction. As long as the weekly close is above the weekly close 15 weeks ago, all is right for the bulls and the broad markets continue in a nice uptrend. When price falls under the level from 15 weeks ago, this signals that the utes have fallen into a weekly downward trend and signals big trouble for broad markets. That's Part 1. If that occurs, watch for Part 2, which is a failure of the 50 week MA. Think of the 50-week MA as representing a trap door for the broad indexes, if it fails, then the broad markets will sell off substantially, and quickly, shortly after the breach occurs.

Let's take a look. Starting on Monday, 1/23/12, thru Friday, 1/27/12, if the neon green line fails at 439 (438.76 to be exact), the broad markets will be experiencing increased serious selling pressure. Even if next week goes by and price maintains the 439 support without failure, the following week starting 1/30/12, has a more difficult level to maintain, the pink line at 453 (452.66 to be exact). Note, today's print at 447 is already under this value, but it will not officially matter unless that occurs from 1/30/12 on. For now thru next Friday, focus on 439 as the trigger.

Should the 15-week look-back number fail, next watch the 50-week MA, now at 431.35 which will signal broad market failure imminent. Note how Chairman Bernanke saved the markets with QE2 as the markets already started over the falls in August 2010; that was an epic market save. The black circles all represent points where the broad markets were on the verge of failure, but the bulls pulled the indexes back from the brink each time. That luck does not last forever.

Projection is for sideways to sideways down price movement with UTIL failing one of the 15-week look-back levels either next week or the week after.  This will signal that the utes are in a weekly downtrend and the broad markets will noticeably sell off. As that occurs, the price action can then be assessed in relation to the potential failure of the 50-week MA.  Obviously, the bulls are going to try to stay up above 453 for the next month.

If you see a sharp spike higher in the utes over the next couple days, then the fix is in, the bulls are in the markets trying to stop the trouble brewing. If UTIL drops under 439 next week from the opening bell on Monday forward, the markets are in serious trouble. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.