The utility sector has been treated as an equity haven by many traders during these turbulent few months, which has sending the Utilities Select Sector SPDR ETF (XLU) up nearly 9% in the last six months. Unfortunately, as XLU creeps up, momentum has not followed, making lower highs and giving signs of exhaustion for utilities.
One way we are able to measure the strength of a trend is with the Average Directional Index (ADX) indicator (the sold black line in the bottom panel of the chart). ADX is meant to be used to determine the amount of strength (or weakness) a given trend has, with no regard for the actual direction of the move. As price makes new highs, we see the strength of the trend beginning to breakdown, with ADX falling since mid-June.
XLU is also approaching its 2007 high of $37.86, which could act as a possible level of resistance we need to key an eye on.
