Utility streak

Utility stocks have had a rough couple of weeks. The XLU fund has now recorded 10 consecutive down sessions for only the 2nd time in its history. The other was October 6, 2016.

Utility stocks bounced soon after, then dove to a lower low before a sustained uptrend. Looking across dozens of the most popular ETFs, that was fairly unusual. Historically, this is a rare signal, with only 39 instances in over 20 years across 68 funds.

The table below shows each time an ETF recorded 10 straight losing days, along with the one-year forward return. Incredibly, this has triggered only 3 other times when the fund was trading above its 200-day moving average at the time of the losing streak.

It was not a great mean-reversion signal. Buying each of the funds after 10 straight losing days, the win rate was only 28% over the next two days. It didn't climb above 50% until three weeks later. Even the ones that triggered when trading above the 200-day average preceded poor longer-term returns.

Bulls on Utilities should look for a better reason to buy than the potential that traders are too pessimistic after a couple of weeks of persistent selling pressure.