Sunday, August 12, 2018

UTIL Utilities Weekly Chart

Keystone has not posted the utes in a while. The old-timer's follow the utilities from the Norm Fosback days of technical analysis decades ago. There are two key levels to watch; the 50-week MA and the closing price 15 weeks ago to determine if the utilities are in an up or down trend. The utilities drop either coincidentally or two months ahead of the stock market when a major move lower is on tap.

Keystone explained this in real-time late last year. The red rising wedge, overbot conditions and negative divergence (red lines) made the top an easy call in early December. The utilities collapsed late last year as the broad stock market moved higher. The failure of the 50-week MA as the year began was an ominous signal ahead. The stock market topped-out on 1/26/18. The utilities forecasted the major top and spankdown about one to two months in advance.

The bulls came in and jammed the utes higher from February forward to prevent the stock market from falling into an extended bear market. The sideways chop continued for much of the year and then the breakout higher occurs in June. That was the tell that the stock market had more upside juice. If you count 15 weeks back for each candlestick starting late June, the utes are in a weekly uptrend reinforcing the idea of an upward-moving stock market.

The brown ascending triangle is 20 handles on the vertical side so if price breaks above the baseline at 730, the 750 level will be on tap. Stock market bears must hold the line at 730, otherwise, stocks will remain buoyant for the weeks ahead despite any near-term pullback.

Stock market bears need the 50-week MA at 712 to fail; that will immediately indicate trouble ahead for the stock market. The purple circle shows that 704.38 is the 15-week look-back number for the week ahead (the week of 8/13/18). In recent weeks, the utes remain above the closing highs from 15-weeks prior, so an uptrend remains in play making for happy bulls. If both the 50-week at 712 and the 704.38 fail in the week ahead, the stock market will be in serious trouble going forward.

However, note that the 15-week look-backs become easier for the bulls. The week of 8/20 will compare back to 689.49, the week of 8/27 will compare back to 667.79 and the week of 9/3 (Labor Day) will compare back to 689.67. The 15-week look-backs remain favorable to the bulls for three more weeks which would be the weeks of 9/10, 9/17 and 9/24. Then the look-backs will begin favoring the stock market bears since that is when the utes began jumping higher in June. If UTIL retreats and falls into a downtrend, and will be under the 50-week MA, it will signal major stock market trouble occurring or about to begin in earnest, say, in late September and through October and November.

Back to the near-term, price is bumping along that 730 ceiling debating whether or not it wants to break out higher to honor the brown ascending triangle. The indicators are neggie d so there is not much fuel or gumption to move higher, however, the MACD line remains long and strong so it does want price to remain at the 730 level or higher for the next one to three weeks. That would put price in the apex of the triangle and force it to make a decision.

What does all this mumbo-jumbo mean? If UTIL begins dropping and takes out the 50-week at 712, the stock market is in trouble. If the 15-week look-back at 704.38 fails in the week ahead, the stock market will be set up to be dropping significantly. Then it will be a question of whether a downtrend can be established with the utilities collapsing sharply lower through 700, then 670 and lower. That will portend extremely bad times coming for stocks and pain for anyone long the market.

If the utilities hold-up over the next few weeks, the major pull-back in stocks will be more likely in the October-December time frame. Watch that 50-week MA; if it fails you will see the stock market retreating sharply lower. Keystone can repost this chart as it progresses if the viewers of the K E Stone blogs want to see it. If not, that is fine, you will have to figure it out on your own. 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 Monday, 8/20/18: Note that the utes move higher printing at 748 close enough for government work to satisfy the ascending triangle target at 750. Price may play here this week and print the 750 but in general, the ascending triangle pattern is satisfied.

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