UTIL Utilities Weekly Chart Upward-Sloping Channel Sideways Symmetrical Triangle Pattern Satisfied Overbot Negative Divergence

This chart was last posted about 3 or 4 weeks ago anticipating the upcoming topping out process. The red lines show firm negative divergence across all indicators across both the longer one year time frame and shorter term few-week time frame. The long and strong MACD line wanted another price high which it received with the red candle spike high two weeks ago and is now negatively diverged and rolling over. Note the money flow already weak and bleak printing lower lows. It is important to see the RSI print lower lows and lose the 50% level to support the bear case. The chart is set up firmly for the bears.

The sideways symmetrical green triangle patterns are text book. The vertical sides are 75 to 80 points with the breakout area at 485 to 490, hence, the upside target area for the triangle pattern is 560-570; achieved, satisfying the pattern. The red upward-sloping channel sends price into an upside orgy of joy. Traders are tripping over each other to buy dividend stocks each thinking (wrongly?) they are smarter than the other since even in a market sell off, the dividend stocks will be safer and at least yield a divvy. What good is a 3% dividend if the stock you buy sells off -10% or -20%? You would need to hold it for years to simply break even if the price did not recover.

Much of the strong thrust higher in utility stocks has to be Aunt Edna and Uncle Paul that are taking their entire life savings and placing it into dividend stocks. The retail investor is caught up in the media hype and bullish television pundits guaranteeing folks that they are as smart as Warren Buffett if they buy dividend stocks especially utes, telecom and consumer staples companies. The funds are all too happy to supply these bagholders with shares as the smart money slides out the back door locking in profits. Pumping and dumping is easy via television. The dividend stock bubble is about to burst. Ma and Pa will likely have their heads handed to them on a platter going forward.

The old-timers use the utilities in two ways to help forecast the stock market. First, the price is important as compared to 15 weeks ago since this tells you if the weekly trend is up, or down. A weekly uptrend in utes goes hand and hand with a bullish stock market. When utes roll over, look out since there is trouble coming conicidentally or within weeks. Second, watch the 50-week MA since losing this level virtually guarantees a cyclical bear market ahead. Keystone also calls this level the 'trap door' since when it gives way the SPX will likely drop 20 to 40 handles in very quick order (within minutes or hours).

If you count back 15 candlesticks (weeks) you arrive at 532-ish (531.61 to be exact). Thus, utilities must stay above 532 or there is heck to pay. At 559, utilities remain in a weekly uptrend verifying the bullish rally in the stock market. The 532 level coincides with strong price action spring 2013 and also from May of this year. The 50-week MA is 512 and rising, call it 515 to match the horizontal support areas. For now the bulls are fine but a loss of the 532 level ushers in bearish markets. Over the next month, that look-back comparison number becomes even more difficult moving up to 550-ish so the bulls have their work cut out for them to keep this bloated behemoth floating. [you can access utility data on YHOO Finance under the '^DJU' ticker symbol; go to historical data; go to weekly data; count down 15 weeks to always monitor the weekly trend in utes]

The projection is sideways to sideways lower for the weeks and months ahead. The 15-week lookback number will be violated over the coming days or week or three at 532-550 ushering in broad market negativity. As the weeks play out, the 50-week MA will fail ushering in a firm cyclical bear market within the ongoing secular bear 2000-2018. (The secular bear market sounds odd considering new all-time market highs but the secular bear 18-year cycles are known for sharp dramatic cyclical bull rallies inside the secular bears such as the 2003-2007 rally and the current 2009-2014 rally; there is still four long years remaining in the secular bear so it has plenty of time to growl; the secular bull is 2018-2036 where wild inflation and hyperinflation will likely send all asset prices to the moon with Dow 30K and more but the dollar will be toilet paper). 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.