XLU Utilities ETF Daily Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation

Utilities are rallying massively this year thus far. As the economy potentially weakens, investors are running to the perceived safe plays that offer dividend such as utilities and staples. The central bankers, however, have destroyed all price discovery over the last decade with their obscene Keynesian money-printing. These are not your grandfather's markets and the economic textbooks can be tossed in the trash.

The central bankers have destroyed the expected business and economic cycles. As economies and markets move into late-cycle behavior during past decades, it was a no-brainer to play defensive stocks. Tickers such as PG would fly higher while the broad market fell into a malaise (PG is topping-out with negative divergence on the weekly chart and now receiving an initial spankdown).

However, the central bankers have pumped all asset classes higher with easy money over the last 10 years. The world is awash in liquidity. Those folks hiding in utilities or staples thinking they are smart (buying defensive stocks that should not drop as much as the broad market in a downturn and will provide a dividend while the economy and markets reset) will realize in the months ahead that they are only covering themselves with a fig leaf made from mesh fabric.

The XLU daily chart above shows overbot RSI, stochastics and money flow all agreeable to a pullback. Ditto the rising red wedge pattern. Ditto the upper band violation with price now wanting to retrace to the middle band at 56.5 and perhaps lower band at 55.21. The indicators are in universal neggie d. Look to the utilities for short plays going forward. XLU, VPU, IDU, PUI, UPW and individual utility names, as long as the charts are set up the same way as above, are short plays. Keystone does not hold any short utility plays currently but will going forward starting today.

The weekly charts have a bit of juice remaining so after weakness occurs on the daily chart there may be some sideways chop, then a down move for several weeks. This potential down move in utes may lead the broad stock market lower on a multi-week basis, say, in the April-May-June time frame. 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 7:08 AM EST Wednesday Morning, 3/13/19: The CPI data continues showing the lack of inflation occurring. Core CPI misses expectations. With no sign of inflation, the Fed will remain accomodative and Treasuries will receive a bid. Yields drop after the CPI data so the utes pop higher for another high. Utilities love lower rates because they typically have to finance big-money long-term projects. The joy adds some additional upside juice which should slightly extend the top. Keystone is holding shorts in utilities now and will likely build on that going forward.