One of the most prominent sectors in recent months, and for the better part of 2014, has been utilities. Since February, it has actually been one of very few places you could feel confident about trading with relatively consistently.
However, utilities hit a significant snag a couple of months ago as they unraveled and dropped roughly 10%. Now, we are in the midst of a critical juncture for this sector.
Will it bounce back?
Back in June, the S&P 500 (the benchmark index for the overall market) was hitting new highs, and utilities followed along with it. The sector peaked during that month, just before they began that 10% decent that took a month to complete.
The good news for investors is that utility stocks appear to be recovering already, and a solid recovery could mean that utilities would once again be the place to be.
And it’s no shock that the utilities sector has just recently begun its recovery when we take a look at the chart of the S&P 500 from Stockcharts.com:
It’s no coincidence that utilities turned around in early august. The entire market just finished experiencing a healthy pullback at the same time.
And with oil production at record highs, the overall market and utilities appear to be at a healthy point.
Although the utility sector is one of the worst in terms of relative strength over the past 1 and 3 months, it is currently still the top sector over the past 6 months.
And the utility sector is currently the fastest growing sector with 83.91% of its stocks advancing yesterday.
So, if this bullish recovery can be sustained, look for utilities to soon become the top dog once again. But BEWARE, with the market in a sensitive position after a pullback, another pullback in the near future could mean the worst for utility stocks.
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