Utility surge

They're pulling back today, but utilities saw an unusually strong surge yesterday. It's not often that the sector leads all others in the percentage of its stocks at new highs.

We've discussed many times in the past the idea that defensive groups, and utilities in particular, tend to show poor returns after bouts of extreme momentum. This one isn't really any different.

After more than 38% of its stocks hit a new high, XLU was positive only 40% of the time two months later. Out of 204 days that met this criteria, 78% of them saw XLU decline either one, two, or three months later. Of the signals that shrugged off that weakness, the median return from 3 months later to 12 months later was -3.9% with 38% of them showing a gain.