Play the Divergence in Utilities

Market lore keeps close watch on utility stocks for signs of economic strength or weakness. This canary-in-the-coal mine sector can expose recessionary environments, as well as turning points ahead of periods of cyclical growth. Simply stated, recessions usually don't happen, or are shallower than expected, when this group is in rally mode.

All this gives the sector's current performance in this ugly bear market added significance. Utility stocks have acted better than expected since mid-October, holding high in their two-month trading ranges and never testing deep lows, unlike the broad indices. This supports a more positive technical tone for the group heading into 2009.

Dow Jones Utility Index

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Source: eSignal

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