UTIL Utilities Weekly Chart Useful Forecasting Tool

The utilties are a very useful market trigger. Trading techniques such as the 15-week look-back for the utilities sector have been used for decades by seasoned traders.  Yesterday, the utes fell thru their weekly closing high from 15 weeks ago, a very significant development, ushering in market bearishness. The number to watch this week, and the remainder of today's trading is 472. If UTIL remains under, the markets will cointinue to weaken, if UTIL pops back above 472, the broad markets will noticeably improve. This number of interest changes to 464 for next week. Thus, the 4 PM EST closing number for UTIL is very important today. If UTIL closes the week above 464, utes will provide a positive influence on markets starting Monday at the opening bell. If UTIL closes today under 464, that will forecast strong market selling into next week.

The picture becomes more interesting.  The level to watch for the following week, 9/4/12 thru 9/8/12, the holiday-shortened week, is 478.48. In other words, UTIL must be above 478 seven trading days from now, otherwise, the markets will be in major turmoil and trouble moving forward. Another interesting aspect for utilities is that when they lead the broad markets lower, as they are now, this is a very ominous market signal. The largest pull backs in markets over economic history began with the utes leading lower.

The media is ignoring the utilities sector these days.  A move from the 500 top down to a 469 handle low yesterday is a phenomenal 6.2% drop within four weeks time. Utilities simply do not typically move that way, they are expected to be a more steady-eddy mover.  As investors have been chasing yield lately, fueling the Dividend Stock Bubble, many ran to the 'perceived' safety of utilities so they could sleep at night. After a six percent loss it is doubtful they are sleeping easy.

The last time that the utiltiies sector printed numbers lower than the prints from 15 weeks prior, was back in April of this year. Note the sideways triangle that needed resolved at the time, and the bulls won out. The triangle has a 50 handle vertical side so that targeted 500 to complete the pattern which printed. The dark blue boxes show where the utes failed the 50-week MA, which can be considered to be a trap door for the broad markets. If the 50-week fails, Katy bar the door, the markets will be in free fall. In the summer of 2010, the broad indexes were going over the falls, the utes had ruptured the 50-week MA, and the economy was spiraling into deflation. In steps Chairman Bernanke on his white horse, pumping easy money with QE2 that saved the day with artificial stimulus. The Fed is in the game of supporting the equity markets, that is what they do. In late summer last year, remember the markets crashed in August 2011, the utes once again failed the 50-week MA opening the trap door for the markets. This caused Bernanke to announce Operation Twist and the ECB to announce LTRO 1 and 2, which saved the equity markets once again.

The drama increases, especially in light of yesterdays developments.  The red line shows the 472 price level which is only applicable for today's trading.  The teal line at 464 highlights the level to watch for next week. The purple line at 478.48 highlights the level to watch for the first week in September.  Step one is where the utes fall thru the level of interest, this occurred yesterday when 472 failed. Step two is the 50-week failing which opens the trap door in the markets. Thus, failure of 459.25 would signal that the equity markets are lost and they will be tumbling lower. This analyis provides the road map for the utes over the next couple weeks so place the popcorn in the microwave, and sit down to enjoy the show. For today, Friday, 8/24/12, 472 remains important, then 464 takes over at 4 PM thru next Friday. 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.

Note Added 8/25/12 at 10:31 AM:  Keystone made a mistake above, perhaps the extra slice of pie made him too sleepy, the level of interest to watch for the week of 9/4 to 9/7 is 467.35.  The 478 will come into play for the week of 9/17 to 9/21. We will watch and update as time proceeds, the same basic analysis holds true. In general for the next three weeks, thru 9/14, watch UTIL 464-467, any drop below indicates that the broad indexes are in serious trouble.