Are you ready for the Superbowl of stock trading this week? It will be epic. It is interesting that the West Coast ports are shutting-down due to the strike problems. Inflation data drops on Tuesday and Wednesday and Pope Powell will bring the tablets down from On High on hump day and tell global traders how to trade. Isn't crony capitalism nauseating? It is what it is.
The SPX broke out of the multi-month sideways range through 3800-4200 and has now floated 100 points higher teasing 4300. The short-term top would have been placed already but the drama with the Federal Reserve, debt crisis and inflation data keeps stocks buoyant. Investors are watching and waiting, holding onto longs with one hand but the index finger of the other hand is ready to press the sell button.
The put/call ratios are in the cellar verifying, along with the VIX, that complacency is running rampant in markets. Many traders are staying long stocks and not worried about any pullback that may occur. Television pundits and commentators opine about how bearish everyone is but as usual they are incorrect. Never listen to what people say since most humans lie especially nowadays. Watch what they do especially with their money and that always gives you the answer. Traders and analysts may wring their hands nervously aboutthe stock market, wiping sweat from their foreheads with stained handkerchiefs, but 10 minutes later they are buying 5 blocks of AAPL, or insert any ticker symbol, at the ask. Traders and investors are off the charts bullish not bearish.
The put/call ratios dictate that a top is at hand and the ST SPX charts are in agreement displaying neggie d. Pope Powell in his pale green robe is the only one that can save the day in the week ahead. Traders are trying to keep equities buoyant through Monday since stocks typically run higher on Tuesday and Wednesday in front of the Fed presser. This makes the stock market price behavior on Monday uber important.
The SPX is topping-out now and will pullback from 100 to 400 points. As mentioned, Powell is the main attraction ahead. Even if stocks would remain buoyant through the Powell presser, the expectation would be for the downside to occur after the new mini-party.
The utility chart is shown above because this tells you if the drop in stocks will be a run of the mill pullback of 100 to 400 S&P 500 points, or, if the pullback is going to be far more serious (go ahead, say the 'crash' word, it's okay).
Keystone has posted and discussed the utility chart many times so you know that the 50-wk MA is key, now at 955, and the weekly closing price from 15 weeks ago that determines the weekly trend. If utes are in a weekly uptrend, that portends rosy happy times for stocks going forward but if utes fall into a weekly downtrend, like now, that forecasts serious trouble ahead.
Obviously, the 915 price remains far below the 50-wk MA at 955 so the bears receive a checkmark in their column of doom and gloom. The blue circle shows the closing price from 15 weeks ago at 916.23. This was high drama on Friday since the way UTIL closes at 4 PM EST Friday at the end of the week provides insight into what may occur on Monday morning.
UTIL started Friday at 920 and fell to 915. If UTIL would have ended last week above 916.23, the week ahead would start on an up note with the bulls throwing confetti. It did not. Instead, the bears are joyous that price dropped and ended below 916.23 which sets up conditions for a soggy start to the week ahead. Of course, it is a game of pennies and dollars now since price may explode above 916.23 at the opening bell on Monday. Conversely, UTIL may collapse on Monday hinting at the start of major stock market trouble ahead.
The purple circle shows the 15-week lookback comparison number for the following week of 6/19/23. For that week, the 916.23 becomes a worthless number replaced by 887.55 a far easier number for the bulls to stay above.
Stocks are expected to top-out and sell off in the days ahead. Watch UTIL. If price moves above 916.23, that tells you that the pullback in stocks will not be a big deal and will likely be followed by more upside in the weeks ahead. Obviously, if you are bullish the stock market and blindly holding longs in your portfolio, you better pray that UTIL rallies in the week ahead.
If UTIL remains below 916.23, stocks will likely be dropping like rocks and then the key issue will be where does price end on Friday, 6/16/23, at 4 PM EST, that can provide insight into the following week. If UTIL trends lower in the week ahead but does not break 9 hundo, or even if it does drop below 900 but it cannot fall below 888 by late Friday, that also hints that the pullback may not be that bad.
If, however, UTIL trends lower and takes out 888 and ends the week below 888, Katy bar the door because there would be a high probability that the US stock market will crash going forward. That would be fun. The brown lines show that for the weeks ahead, the UTIL comparison numbers will become more difficult again. A loss of UTIL 888 in the days ahead almost guarantees a stock market crash going forward; this would make the bears smile, as Steve sings. Comically, in Asia, 8 is a lucky number. 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 6/15/23, at 8:00 PM EST: UTIL recovers above 916.23 to 921 a win for bulls but the drama will continue over the next couple-three weeks.
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