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What's the Utility of Looking at the Utes?

I have some thoughts on how to look at the Utes in this market.

The Market

I am going to start with the Utes, because after discussing them last night, when they were at the top of the long-term channel line, they had another terrible day. In fact, it was the worst consecutive red days for the Utes, since the final day of April and early May.

I am not trying to compare this period to that period, but to me the Utes tend to be market leaders. While the timing of their lead can be questionable at best, it is something to be on the alert to. People used to believe it meant interest rates are rising, but considering rates peaked a week ago, I don’t think that is it.

I have another thought for this market. As folks go further out on the risk curve, they shy away from safe stocks, and Utes are safe stocks. So, we’ll continue to monitor them for signs that the selling is done and they are once again buyable. Because when folks are buying Utes, they are nervous about the overall market and have flocked back to safety. At least that’s my view right now.

I prefer to watch the indicators and let them tell us when the market is back to an oversold condition and sentiment is bearish again. But I was asked about support levels on the S&P 500. There are many smaller ones, but the first one I see is back in that 3500 area, where there is a little gap (from the vaccine news 10 days ago) and the black line.

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One final word on sentiment. The Investors Intelligence bulls did not make it over 60% this week, much to my surprise. They notched up to 59.6% and bears fell a bit more than a point to 18.2%. It doesn’t change my view that there is still too much complacency in the market, especially in small cap land. Today was a good first step in working that and the overbought reading off.

New Ideas

To the person who asked about CSX (CSX) - Get Free Report last week. I had thought we’d have to live through a correction, before it resumed its rise. I still think that, but the failure to get up and over that spike high from last Monday is now bothersome and likely means a bigger correction, before the resumption to the upside. It could correct back to mid-$80s to fill the gap near $86.

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General Electric (GE) - Get Free Report is still a fine chart, but it filled that gap at $10 and completed its measured target. Taking some profits is a good idea.

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Finally SPDR Gold Trust (GLD) - Get Free Report, the question of the day. (It seems we get these questions on GLD once a week now.) My position is still the same: I would love it to plunge toward $170-$172, which is a measured target. Accompanied by such a plunge, the Daily Sentiment Index (DSI) could show too much bearishness, which I would love to see. The DSI is currently 36, so that will need time to work its way lower, because the sentiment won’t get low that fast.

The alternative remains that it just goes sideways and everyone forgets about it. I have been patient and will continue to wait for the set up. If you are dying to buy some, then just save some ammunition for a possible plunge.

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Today’s Indicator

The Volume Indicator is overbought at 54%.

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Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

National Fuel Gas (NFG) - Get Free Report has been a chart that has gone sideways for most of this year. In fact, with the exclusion of March and the August high, it has been in a narrow range. For now, I would expect it to stay in that range. What would change my mind would be if it can map out similar to the way I have drawn it in red. The levels need not be exact but the pattern would need to do that: a pullback that holds higher than the early November low and then a rally. Then I’d look for new highs in the stock.

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If Philip Morris (PM) - Get Free Report can map out as I have drawn in blue, I’d be a fan of the chart. It doesn’t have to be the exact levels, but the basic pattern would make the chart desirable. The alternative is if it breaks out and rallies to $80-$81 and then pulls back to test the line. Then I’d buy the test of the line.

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Alibaba (BABA) - Get Free Report has been red for seven straight days (possibly eight) and it has some support here. I would expect a short-term rally to relieve the oversoldness but there is work to be done before the chart entices me. The blue line is first resistance ($268-$270). It’s going to take some work to repair this chart.

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Nike (NKE) - Get Free Report is a chart I want to like, but I struggle, because of that spike high. I think it means too many were caught and would be glad to get out on a rally back there. Should the stock be able to stay over this $130 area I think it can make another stab at trying to get up there.

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Inseego (INSG:Nasdaq) is similar to the chart of Fastly (FSLY) - Get Free Report that we have looked at recently, and I have used as an example of a chart that is given the chance to break and instead breaks and snaps right back. There is a whole lot of resistance all the way up but get this chart back over $10 and at least we can say the process of trying to bottom has started. Failure to get over $10 and there are much lower targets ahead.

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