The Monthly Chart of the utilities via IDU
The Alternative TI Dow Theory emphasizes that a negative divergence signal should never be taken lightly, as they are rare occurrences. In the last 20 years, only three such signals have been triggered. What's intriguing about the current negative divergence is that it has been triggered thrice in the span of 11 months. It is even more unusual that none of our indicators is trading in the highly oversold range, and there is no indication of a positive divergence signal either. Additionally, last year's failed Tail End Move, which typically boasts a 90% success rate, further reinforces that the correction is not over. These factors suggest that most indices will likely test or even trade below their 2022 lows, with the possibility of one index diverging and putting in a higher low. This would be the first clear indication of a long-term bottom.
If this were the only warning signal (others were covered in detail in the last update), our concern would be lessened. However, looking back at decades of data, there has never been a scenario where three negative divergence signals were triggered within an 11-month period. Therefore, we will remain vigilant and allocate only a small amount to new plays while building cash until a clear buy signal emerges.
