Dow Jones Utility Index (DJU)

Global Jitters Lift Utility Stocks

Posted in Dow Jones Utility Index (DJU) on March 20th, 2014 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

With worries and a rise in political rhetoric over the referendum in the Crimea region of Ukraine today, and with concerns that Chinese debt issues could pose a threat to global growth, the Dow Jones Utility Average (DJU) climbed steadily last week. Moreover that average, which is perceived to be have a defensive bias to it by many investors, is now approaching at test of key downtrend resistance at the 535 level.

Since the DJU is currently in an overbought technical condition on weekly charts, a break above 535 could be a sign that investors are retreating from risk and running to safety instead. And while a move up to resistance at 570 could follow a break above 535, a broader look at the Dow Jones Utility Average reveals that a large upward sloping trading channel that allows for sharply higher gains in future months remains in place.

Another issue to consider is that utility stocks, which have risen nearly 9% since January 2nd, have been largely overlooked and somewhat shunned due to investor expectations for a rise in domestic GDP and a steepening yield curve. While a move above 535 could be seen as a near-term run-to-safety maneuver, a move above 570 could be seen as something more than just retreat from risk.

Nevertheless, overbought conditions are in place at this point in time and could imply that any major upward thrust from current levels could be limited. Time will tell.


Dow Jones Utility Index: A Defensive Play Or Weather Related?

Posted in Dow Jones Utility Index (DJU) on February 6th, 2014 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

The Dow Jones Utility Index (DJU) closed just below key “cross” trend resistance at 508, accompanied by a set of indicators that suggest a “break” to the upside is likely to occur sometime soon. Technical oscillators on weekly charts are all aligned bullishly at the moment including: stochastic, RSI (Relative Strength Indicator), and MACD (Moving Average Convergence-Divergence) studies.

Clearly, weather related conditions are pushing the demand for power to near-record levels this winter, which points to an increase in top-line revenue growth for utility companies. That said, the demand for energy sources to fuel electric power as well as heat for homes and businesses is also on the upswing which could result is subdued profit margins.

Nevertheless, the recent setback in the S&P 500 and Dow Jones Industrial Average has shifted investor attention back toward fixed income securities and dividend paying stocks as a defensive measure. Those would include telecom stocks like AT&T (T, 5.50%) and Verizon (VZ, 4.40%) as well as utility shares that traditionally pay higher dividend yields. Those would include names like Southern Company (SO, 4.90%), Exelon (EXC, 4.30%), Duke Energy Corporation (DUK, 4.40%), Consolidated Edison, Inc. (ED, 4.60%) and American Electric Power Co., Inc. (AEP, 4.10%).

Technically, if the Dow Jones Utility Index were to break above key resistance at the 508 level, an extension up to a test of long-term trend line resistance currently at 535 could emerge. A break above 535, however, would likely result as a byproduct of a stepped up run-to-safety maneuver if the decline in the broader markets were to intensify.