The answer is I do not know, nor can I put together a concrete case yet. That said, I can see a short-side picture emerging in the sector. Definitely an area for more work.
The potential short-case for utilities goes like this
- Investors that had picked up utility shares for the dividend yield may rotate out of the group with the uncertainty surrounding the fiscal cliff and the possibility of the U.S. government raising the the tax rate on dividends.
- Rising input fuel prices could hurt the operating margins for independent power produces and those regulated utilities with a merchant fleet of generators. For instance, First Energy (ticker FE) and PG&E (ticker PCG) had stock prices come off the highs, on volume, following both companies announcing reduced expectations on higher input costs.
- The commodity prices for both natural gas and coal may have reached a bottom. For instance....
- As for the technical analysis of the XLU (the Utility Sector spider ETF). The trends in the RSI and the price have diverged, which I have found can be an indication of impending trend change. Ditto for the MACD. This is while the A/D line is declining. Lastly, there appears to be some volume off the high in the group.
The potential short-case for utilities goes like this
- Investors that had picked up utility shares for the dividend yield may rotate out of the group with the uncertainty surrounding the fiscal cliff and the possibility of the U.S. government raising the the tax rate on dividends.
- Rising input fuel prices could hurt the operating margins for independent power produces and those regulated utilities with a merchant fleet of generators. For instance, First Energy (ticker FE) and PG&E (ticker PCG) had stock prices come off the highs, on volume, following both companies announcing reduced expectations on higher input costs.
- The commodity prices for both natural gas and coal may have reached a bottom. For instance....
- As for the technical analysis of the XLU (the Utility Sector spider ETF). The trends in the RSI and the price have diverged, which I have found can be an indication of impending trend change. Ditto for the MACD. This is while the A/D line is declining. Lastly, there appears to be some volume off the high in the group.
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