UTIL Utilities Weekly Chart

With the stock market poised to roll over, the utilities are a useful gauge to assess whether the move lower will be substantive and longer term, or not. The chart above looks like a bowl of spaghetti. It reminds Keystone of mathematics class, or maybe geometry. Perhaps a new art form that is also functional.

Anyhoo, UTIL begins the week with a +1% pop to the 818 palindrome. Utes are battling for their life at the 50-week MA at 834. The two key metrics used to assess the utes, as highlighted by Norman Fosback decades ago in Stock Market Logic, are the 50-week MA and the weekly trend which is measured as an uptrend or downtrend depending on the closing weekly price from 15 weeks ago. Humorously, Is that clear as mud?

UTIL is at 818 below the 50-week MA at 834 which is an ongoing negative indicator for the stock market despite its euphoric bullish joy. The "SPX 3.4K" hats were handed out yesterday on trading floors but the upside records will not continue unless UTIL moves above 834.

The purple circles show the 15-week lookbacks in play now and for the next 3 weeks. If you count backwards 15 weeks, you arrive at the lower purple circle when UTIL closed that week at 744. UTIL is handily above that at 818 so the stock market bulls are walking around with their chests puffed out proclaiming that stocks will run higher. The bulls are correct with the 15-week lookback but cannot do any bragging unless price takes out the 50-week to the upside. The 744 is an easy beat. Next week, the 15-week lookback number moves higher to 764 so the plot will thicken. For the week of 9/8/20 (US markets are closed 9/7/20 for Labor Day), the lookback number to determine the weekly trend in utes is up to 807. Whew, doggie, as Jed Clampett would say. That is around where price is now.

For the week of 9/14/20, the lookback number is 827 above current levels. If this was in play now, UTIL would slip into a weekly downtrend. For now, however, and likely the next week, UTIL will probably remain in the weekly uptrend. Things are going to become dicey very fast, however, especially after Labor Day.

When UTIL is in a weekly uptrend and above the 50-week MA, that is great news for the stock market as it rallies higher and higher. If one of the parameters fail, stocks will tend to favor more of a sideways move. If UTIL falls into a weekly downtrend, and then price loses the 50-week MA, it is typically lights-out for the stock market for the intermediate term and this failure will usually create a 30-point drop or more in the SPX immediately. The situation now is a bit different. The 50-week MA trap-door is already opened and price has failed. The weekly uptrend is what is holding up the utes like a lamppost holding up the town drunk. 

Watch the price behavior closely. If UTIL loses 744 this week, it is lights-out for the stock market into year-end. Next week, if UTIL loses 764, the stock market is toast into year-end. For the week of 9/8/20, if UTIL loses 807, the stock market will sink like a stone into year-end. For the week of 9/15/20, if UTIL loses 827, which price is currently under, it is over for the stock market into 2021. At anytime over the next 4 weeks, if UTIL moves above 834, it is party time for the stock market that will go straight parabolic printing record highs that no one would think possible.

The chart is not tipping its hand as to which way it wants to go. Just as there is a fine line between love and hate in life, in charting, there is sometimes a fine line between an ascending triangle (green) and a rising wedge (red). The ascending triangle is a bullish pattern. It has a vertical side at, say, 170 points so if price breaks out above the upper base line at 830-ish, that would target 1,000. The rising wedge is a bearish pattern and the collapses can be epic and dramatic (look at all the current stock index charts). You may blink and UTIL will be sub 750 plummeting lower. The blue lines show the ongoing sideways channel in play with price playing around at the top rail for the last 7 weeks. The channel favors a move lower in price to the bottom rail at 750-ish.

The chart indicators are not providing any predictive value currently. Everything is lining out sideways, including the 50-week moving average that has been dead flat at 834-835 the last few weeks. Trading volume is slumping off. The brown circles show the distribution weeks occurring since the Feb-Mar crash. That's the smart money handing off shares to the dumb money.

Utilities will move lower before, or coincidentally with, the broad stock market. Utes are trending down for the last 3 weeks. Typically, utes will roll over and move lower from zero to 2 months before the broad stock market peaks and rolls over. We are in this window now and the expectation would be for stocks to begin rolling over.

As the selling intensifies, watch the utes closely. As equities are thrown out the window, if UTIL stops moving lower, stabilizes and begins to show an upward bias, that tells you the market selloff will not be too bad. Even if it is a correction (a -10% or more collapse), stocks should recover again. If stocks are dropping and the utes travel to Hades with the broad market moving lower and lower, that is immensely problematic for the stock market and hints that the drop in stocks will linger on for many months and perhaps years forward. Utilities will play a key role going forward especially in September. 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 8:30 PM EST: UTIL 810.