UTIL Utilities Weekly Chart; H&S

Utilities are key to the broad market path ahead especially over the intermediate term (weeks and months). Utes went into a weekly downtrend at the neon square 8 weeks ago. By comparing the current price to the price 15 weeks ago determines whether utilities are in a weekly uptrend or downtrend. The weekly downtrend continues. Interestingly, when utilities lose the weekly uptrend and turn into a downtrend, the broad stock market typically rolls over within a couple months. Moreover, UTIL lost its 50-week MA, which Keystone calls the trap-door, which portends ominous things ahead for the stock market in the intermediate term.

Instead, stocks rally to new all-time highs after the Trump election boosted by the banks, commodities, basic materials, industrial and small caps. The rise in Treasury yields should keep the utilities subdued since large funding of utility projects are sensitive to interest rate hikes.

The chart is a mixed bag. The blue lines clearly show a textbook head and shoulders (H&S) pattern in play. The neckline is at 640 and head at 720 which projects a downside target at 560 (640-80). Price collapses through the neckline two weeks ago and last week comes up for a back test and decides to park there over the weekend. The pivot from the neckline is important on Monday. The typical expectation would be for price to fail and the trek to 560 to begin, however, these are not your  grandfather's markets. The central bankers have contorted and convoluted all asset class behavior over the last few years.

The indicators show positive divergence which created the bounce last week sans the MACD line which is still slightly negative-sloping hinting that another test of the recent low at 615-625 would be desired. The RSI, MACD and money flow have not reached oversold levels which leaves the door open for lower prices.

The bulls need further follow through to the upside and for price to regain the neckline of the H&S. The 50-week MA at 653-ish is key. As long as UTIL stays below here, the expectation would be for stock market trouble in the weeks and months ahead. If UTIL regains 653, the bulls are likely going to take the stock market higher into year end. The brown line is where the weekly trend would turn into an uptrend and the purple line is for next week (week of 12/5/16) which would create a weekly uptrend. This week, watch the H&S neckline at 640, the 50-week 653 and 682-ish (brown line signaling a new uptrend for utes) closely. Next week, 640, 654 and 668-ish (purple line) will be key. Of course bears want to see a pivot lower from the neckline at 640 and they will throw confetti knowing that the stock market will be in trouble going forward on the weekly basis. 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 at 3:04 PM EST on Monday, 11/28/16: UTIL leaps higher to 652.06. HOD is 652.18. The 50-week MA is 654.44 and rising. The market bulls will win big over the intermediate term if they can push UTIL above 654.44. Market bears need to push utilities lower immediately.