The Utility sector has had major changes in the relative performance this week. It wasn't just Friday as there appears to be another major event that changed the focus.
First of all, let me describe the chart. When each of these are trending higher, Utilities are performing better than the other sector being compared to in each ratio. When these graphs start breaking trend lines, it is helpful to see the changes in the market. In the last week, this sector really started to let go. But the peak coincides with another major event that should be placed on every chart.
The major event that the peak coincides with is the new unbridled QE in Europe. This led a massive change in the sector rotation in the last two weeks. Based on my analysis of the markets this week, there is a large scale rotation away from defensive sectors similar to the move in 3rd Quarter 2012. What happened then? All the Central Banks did coordinated easing and the US went on to start QE Infinity as it came to be known. While these graphs broke before the announcement of QE, there was a lot of discussion leading into the July meeting and the Bretton Woods meeting in August.
Lastly, how big was this trend away from Utilities that started in 2012?
With the exception of April 2013, Utilities under performed almost every other sector for 2 years. The red lines just starting on the right hand side of Chart 3 are from the first chart (2014 - current) trend lines. The pinnacle top the last week of January 2015 on Chart 1 of these charts suggests a major change in trend. You may want to scroll back and look at the top chart. In the big picture, it shows the utilities trending up against most sectors in the last year. The number of Central Banks that have already eased monetary policy in 2015 is big! Zero Hedge lists off 16 Central Banks that have eased monetary policy in 2015. Be sure to check out my next article in "Martin Pring's Market Round Up" where I'll be discussing the major sector changes that are currently underway.
Greg Schnell, CMT