UTIL Utilities Weekly Chart; Overbot; Negative Divergence; AI Party in Utes Is Over

Sleepy utilities sprang out of bed a year ago and started running crazy higher fueled by the artificial intelligence (AI) orgy. AI will need mountains of electrical power to generate those incorrect answers to questions that are only based on the information that exists on the internet. Greedy humans frantically work towards supplying the power for AI when they did not care about providing electricity to starving communities in underdeveloped nations. Such is life.

Anyhoo, utes got caught up in the AI hype and suddenly everyone wants to dance with the ugly boring girl because her daddy AI has lots of dough. The rally is spectacular from the 765 low in October 2023 to the current record high at 1080; that is a +41% gain in only 13 months.

But, all parties have to come to an end and the cops arrive to take names. Million Miles Away. Price is making matching and higher highs with the AI orgy on full display, however, the red lines show all the chart indicators sloping lower with negative divergence. The top is in on the weekly basis. She does not have anymore fuel in the tank to move higher. The RSI and stochastics are also coming off overbot levels.

The pink box for the ADX shows that utes remain in a strong uptrend on the weekly basis but take a closer look. You can see that as UTIL makes a new record high in price, the strong trend shown by the ADX actually weakens and does not extend higher. The ADX is a lagging, or confirmation tool. Once price begins dropping, utes will be in big trouble when the ADX loses 28-ish since the strong uptrend in utilities will be officially over.

The Aroon top bullish line shows that nearly 100% of the utility bulls continue believing that UTIL will go to the moon and nothing will stop it from rallying higher forever. Comically, the lower bearish line shows that nearly 100% of the bears also believe that utes will go up forever. Everyone has bought into the AI hype lock, stock and barrel. It is a contrarian indicator telling you that everyone is partying on one side of the boat and it is about to capsize. 

Utes are programmed into the Keybot the Quant algorithm. As mentioned many times over the years, you must watch the weekly close for UTIL 15 weeks ago since it dictates if utes are in a weekly uptrend or downtrend. This direction typically tells you the direction of the stock market. There is big trouble ahead if the weekly trend develops into a down trend and then all hope is lost in the stock market if the 50-wk MA fails that is now at 943.

Count 15 candlesticks backwards and you can see the numbers that UTIL must start to beat to keep the US stock market party going. You can look at Yahoo Finance under ^DJU and historical data and simply count down 15 numbers for the weekly data to identify the key lines in the sand, or simply pull the numbers off the chart. You want to use the closing number from 15 weeks ago. For this week, UTIL must stay above 1004 to keep the bull party alive in the stock market.

For next week, the first week of December, the UTIL line in the sand is 1010. Then, for the week of 12/9/24 it is 1021. For the week of 12/16/24 it is 1029 then for the week of 12/23/24, Christmastime, it is 1054. UTIL is at 1066 right now. There will be Hell to pay in the stock market if any of these numbers fail going forward.

The set-up for the utes present a bad omen for the stock market. Keystone is in a dark room holding a flashlight under his chin that points upward over his ugly eerie face as he discusses a dire scenario forward. Poison Heart. The previous charts highlight the top in the SPX right now and stocks are expected to be weak going forward for several weeks. It makes sense since there will be tax-loss selling and other tax stuff occurring over the next couple weeks that typically create soggy equity conditions.

With US stocks expected to drop going forward into December, and UTIL expected to drop, if utes lose the key values mentioned above, especially if UTIL loses the 943-ish area, stocks will likely drop from -10% to -20% or more. There is lots of fun ahead. If utes do not fail any of the levels above, the drop in the US stock market to end the year will be a run of the mill pullback of a few percent.

If you are in utilities on the long side, take your money and head for the exits, otherwise, you will be sliced and diced over the coming weeks. You only want to be short utes going forward due to the neggie d above. Keystone is currently not holding any positions short of long in utilities but will obviously play the short side if so inclined going forward. 

The AI hype has ran its course for now. Traders and investors are going to want to see rock solid examples on how customers justify all the obscene spending on AI chips that will be outdated by the time a company gets around to implementing the garbage. As the economy slips away next year, no one is gong to want to see big spending on AI when folks cannot find jobs and are struggling to survive. 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 Tuesday Afternoon, 11/26/24, at 5:04 PM EST: UTIL rises to 1080 with a new record high at 1080.22. Traders throw confetti proclaiming that utes, tech and AI are the future with these stocks guaranteed to grow to the sky. The Uber driver said he went 300% long the utilities with his whole paycheck. The doorman sold his car and used the money to buy utility stocks. Everyone agrees that utes will move higher and traders pat each other on the back while waiting for the free, company-provided, buffet. Everyone is in the conga line following each other. What can possibly go wrong?

Note Added Sunday, 12/1/24: UTIL prints a new all-time record high at 1086.52 on 11/27/24 and a new record closing high at 1079.88 on 11/26/24. Traders keep believing in the AI revolution and need for power and utilities as they walk towards the guillotine.