UTIL Utilities Weekly Chart; Battle at 50-Week MA

Two key levels in the utilities are important to the old-timer's. First, the price from 15 weeks ago determines if utes are in a weekly uptrend or downtrend and this trend projects the direction of the broad stock market. Second, the 50-week MA for utilities is a key level for forecasting the intermediate term ahead for equities.

The comparison number from the weekly closing price 15 weeks ago is 656.19. This number remains important for today and tomorrow. Next week, the 15-week lookback number is 671.78 and for the week of 1/3/17 is 694.24. So the comparison numbers rise sharply. If the market bulls want higher stock prices they need the utes to remain in a weekly uptrend which requires price to be above 656 this week, above 672 next week and above 694 for the first trading week of the new year. Bulls need to begin rallying utes strongly higher to meet these loftier goals.

The action at the 50-week MA this week is a back kiss of the underside of the key moving average as seen from the chart above. Price came down for a test of the 50 in September and bounced. Price than came down for another test and failed through the 50-week MA which opens a trap-door for the stock market. The central bankers prove too powerful and will not permit stocks to properly correct as evidenced by massive stimulus from the BOE after Brexit and ECB QE over recent months. The BOJ and Fed also remain accomodative all year long although the Fed did squeeze in a rate hike last week. Utilities recover and come up for the back test of the 50-week MA.

The behavior at this 656-659 level is key today and tomorrow. Dow 20,000 and SPX 2300 are on tap if UTIL moves above this key zone heading higher. If the bears keep UTIL low and moving lower, and 656 fails, stocks are going to begin tumbling lower in earnest. At the closing bell tomorrow monitor where UTIL is at in relation to the 671.78 level mentioned above. If UTIL is in the neighborhood of 670-671 tomorrow and higher, the market bulls are going to rally stocks further into the new year with more record high prints.

If UTIL falls under 656, stocks are in trouble. If UTIL ends the week tomorrow under the 50-week MA at 658.55, that spells big trouble for stocks next week. Many algorithms have the above two parameters priced into their computer models. Both are programmed into the Keybot the Quant algorithm. The price action in UTIL is going to tell a lot about stock market direction ahead. 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 on Saturday, 12/24/16, Christmas Eve: UTIL ends the week at 660.81. The 50-week MA is at 658.58. Next week's lookback number is 671.78. The market bears will immediately receive a feather in their caps when trading resumes next week since UTIL is under the important 671.78 level which is important all of next week. Bears need UTIL to drop under 671.78 and the stock market will begin quickly falling like a rock. If the bulls can keep UTIL above 659 and heading higher towards the 672 level, the Dow will be printing 20K and the SPX will be on its way to 2300. Monitor UTIL, or DJU, the Dow Jones Utilities, closely next week.