The Daily Chartist: Swinging Sentiment Shows Up in Utilities

The Chartist sees a clue about market bottoms in this safe-haven sector.
Author:
Publish date:

April 27, 2000

Sentiment: It's so emotional. Tuesday, everyone was convinced we'd bottomed. Then Wednesday saw no follow-through, so that left plenty of doubt. It was as if everyone woke up Wednesday and realized the

Employment Cost Index and the

GDP are being released on Thursday. C'mon now, serious investors knew about these numbers before they bought on Tuesday. But this back and forth bull/bear debate is common when a market is trying to find a bottom.

What's more important is the direction of those

Investor's Intelligence

numbers: The bulls have dropped off significantly, and that means sentiment we can measure, not the anecdotal kind, is really heading in the right direction. The percentage of bulls now stands at 50.5%, down from 56.9% just two weeks ago. Most of those bullish folks have drifted over to the correction camp, pushing those looking for a correction up over 20% from 15.9% just two weeks ago.

Adding to this sentiment swing is the huge run-up we've seen in those safe-haven utilities. In just one month, the

Dow Jones Utility Average

has run 21%. That's not a typo! Heck, that's the same percentage the

Nasdaq

ran in its first month off the October low. These are utility stocks we're talking about, not growth stocks!

With this in mind, I looked at the last time the Utes had run so far so fast: fall 1998. From Sept. 4 to Oct. 7, the Utes ran 21%. And if you were around then, you'll recall there were plenty of reasons to want a safe haven during that time. In fact, you can see from the chart of the two averages (DJU and Nasdaq) that there is a direct correlation between the Utes making a high and the Nasdaq making a low. With the DJU trading so close to its old highs and having run so far so fast, it's likely the Utes are closer to a high than a low.

I don't claim to have a clue what the economic numbers on Thursday will reveal, but it seems to me that if these numbers take the market down, declines are more likely to hold, making the market closer to a low than not.

And don't forget to keep your eye on the Utes!

Overbought/Oversold Oscillators

For an explanation of these indicators, check out The Chartist's

primer.

Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback at

KPMHSM@aol.com.