Image Source: Pixabay

Even though the piece is from just earlier today, I wanted to revisit the Utilities Target Reached post. Please take a look at this chart:

You will notice that, this time, I used the cash index itself (the Dow 15 Utility Index) as opposed to the ETF fund symbol XLU.

The reason I did this is that I was somewhat dismayed at how the XLU chart was looking. Two things bothered me:

1. A few days after my “buy” recommendation, an slightly lower intraday low was made. This is NOT reflected in the index itself. Putting this another way, using the $UTIL as the basis for judgment, I did in fact nail the exact intermediate-term low almost precisely, and certainly to the hour.
2. Today, Wednesday, the XLU went above the Fibonacci retracement level, which didn’t agree with my analysis. Looking at the $UTIL itself, the Fibonacci is SPOT ON correct.

What I realized is that the “distortions” that exist with the XLU, due to the price data being adjusted for dividends (which for Utilities are no small thing) muddies the water. It didn’t even occur to me to take a look at the cash index and its Fibonacci today, and I was bowled over by just how picture-perfect it was. I nailed the bottom, and if today’s high holds, I nailed the target.

Thursday is a big day, of course, so this could all be rendered moot if the Utilities just keep soaring. For now, however, I wanted to share with you this important distinction between the cash index and the fund on which it is based.

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