UTIL Utilities Weekly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation

Everyone keeps asking if the big stock market top is in. Keystone has been highlighting the monthly charts and waiting for the stars to align this year. When the multi-month and more likely multi-year top prints, it will be in sync with utilities rolling over at the same time or utes rolling over from zero to 2 months ahead of the broad stock market. As the utilities continue to rally this year, it is tough sledding for the market bears. Thus, a key exercise is watching the utilities to see when they roll over.

Two tools are useful to assess UTIL; the 50-week MA and the closing price 15 weeks ago. The 15-week look back determines if the utes are in a weekly uptrend or downtrend and this will correspond to the same direction in the broad stock market. Obviously, market bears want to see UTIL roll over into a weekly downtrend which portends trouble ahead for equities. Also important is the 50-week MA support now at 711. Consider this as a trapdoor for the stock market. These technical analysis concepts with the utilities are from Norm Fosback years ago; copies of his red cover Stock Market Logic book should be floating around somewhere. 

The 50-week MA is at 711 and price is at 759 so obviously this is bullish for the stock market. The blue line is at 738.38 the closing price from 15 weeks ago. As long as price remains above 738 for the week ahead, UTIL remains in a weekly uptrend and the bulls are happy. Bears need UTIL to drop below 738. Things get interesting for the week after which is 12/4/17 through 12/8/17 since the UTIL 15-week look back number is 746.48 shown by the brown line. Now we are getting more in the neighborhood of the utes potentially rolling over into a weekly downtrend. For now, the trend is up.

The red lines show negative divergence across all indicators so a spank down a la the June and September pull backs is likely on tap. The RSI is trying to sneak out a hair more juice but UTIL looks like it needs a rest. Stochs are overbot and agreeable to a pull back. The red rising wedge pattern is ominous since prices can collapse quite dramatically from a rising wedge.

Look at the big upside volume coming into the utes over the last month. Market geniuses pat each other on the back and tell one another to buy utilities since they are safe defensive plays that pay a divvy. What dolts. The central bankers have destroyed the expected business and economic cycles. The easy money has jammed all asset classes into overextended territories. In past economic cycles, sure, utilities and consumer staples were good places to hide in an economic and market downturn but not now. These sectors are pumped as high or higher than the broad stock market the opposite position they would be in if the economic cycles were functioning properly without non-stop central banker liquidity. If you are one of the Einstein's that invested heavy in utilities over the last month and told your wife that you are as smart a trader as Jesse Livermore, you are instead only covering yourself with a fig leaf and may want to rethink your strategy.

The ADX pink box verifies that UTIL is in a solid uptrend. Market bears need the ADX to drop sub 25 to show that the uptrend in utilities, on this weekly basis, is done. Note how price has violated the upper standard deviation band and then returned to the middle band over recent months. Price has violated the upper band again so the 739 is on the table and even the lower band at 766. Price is also extended above the moving averages requiring a mean reversion lower.

Taking a gander at the UTIL monthly chart, it displays a rising wedge pattern, overbot conditions, neggie d across all indicators, an upper band violation and overextended price above the moving averages; all these indicators are bearish. Thus, the stars are slowly aligning for the market bears.

Watch the UTIL 738 level for the week ahead and then starting Friday, 12/1/17, at 4 PM EST and all of the following week, watch UTIL 746. If these numbers fail, you know the stock market is slipping into big trouble ahead. If UTIL remains above 738 for the week ahead and 746 the week after, it is nothing but blue skies and rainbows ahead for the stock market bulls who will be singing "Happy Days Are Here Again" each day while sipping Fed wine. 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.