#13 Politics and the Dow Jones Utilities Average. Plus a teaser about Ed Rendell

That title is a mouthful. But the way the Democrats are attacking each other right now, it may also be the Democrats' best chance to win the election.

Helene Meisler, stock market technical analyst on TheStreet.com, pointed out (3/3/08) that the Dow Jones Utility average hit an apparent high just near the end of 2007. Further, the DJUA may break out--on the downside--of its current head-and-shoulders pattern. Historically, here’s what has happened recently in similar circumstances (quoting Meisler):

“In 1987 the Utes [the Dow Jones Utilities average] made their highs five months before the market did and 7 months before the Crash. In the 2000-2002 bear market, they made their highs in December 2000 well after the major averages did. This time [2007-2008] they made twin highs in December and January.”

If the DJUtilities Average does break down over the next few weeks, we could have a subsequent breakdown in the DJIndustrial Average (and likely the market in general) sometime this summer or, for neatness of appearance and similarity to other market breakdowns (“crashes”), in October 2008. That kind of stock action would bode VERY well for the Democrats, since the crash would occur under a dubya administration and just before the election.

If the DJUtilities Average closes below about 474, it will have broken down out of its head-and-shoulders pattern, and could test the 471 it hit in late August 2007. If it drops below that level, its next major test areas are in the 450 range, then the 420 range, and, going back to March 2006 and November/December 2005, the 390 range. I’m certainly not saying it will drop that far, just that the Utilities average appears right now to be testing a breakdown and has some serious technical downside risk.

So here we are with math again. Sorry 'bout that. But a stock market debacle anytime between July and October would have a major effect on the election, despite the current debacle between HRC and BO. Right now it appears that John McCain is being given pretty much a free ride (some of his religious advisors notwithstanding) while the Democratic hopefuls attack each other. Stupid, stupid way to run for president, Hillary and Barack. Will it take a bunch of gas and electric companies to come to their rescue? On the other hand, the DJUA could test 474, recover, and move up, taking the rest of the market with it. In that case, HRC and BO better mend their fences in a hurry.

Next time: Ed Rendell, current governor of Pennsylvania, former mayor of Philadelphia, and apparently lots of people's favorite choice for VP on the Democratic ticket. Why triton says no.

triton