[Premium] Monthly Chart Changes

So last month we saw a continuation of the upside trends in Financial Services, IT, Energy, and Fast Moving Consumer Goods which all helped lead the market to new highs. This month we saw reversals lower in Financial Services and Consumer Goods, accompanied by further weakness in the worst areas like Autos, Infrastructure, Realty, and Media. As we'll see in the charts below, mid and smallcaps continue to lead to the downside.

The Nifty 500 reversed back below our risk management level of 11,165, but remains in an uptrend as large-caps continue to hold up the best.

Click on chart to enlarge view.

Mid-caps made new lows after last month's upside continuation and closing near the highs. The lower low moves this from the uptrend category to the sideways category, and with prices below our risk management level, a neutral approach remains best.

Small-caps on the other hand had a big down month and closed at the lows, right at our right management range of 6,140-6,245. This continues to be the weakest of the major indexes, but with prices down 36% off the highs, it's a much harder short than it has been in the last few months.

And finally the Nifty 500, which is a summation large, mid, and small-caps is now back into its 12-month range within a structural uptrend.

The Nifty Financial Services Index was the real catalyst for lower prices, sitting at roughly a third of the major index's weighting. Prices made new marginal highs last month, but quickly got back below our risk management level of 11,520 and traded lower all month. We're now back into this sideways range, but the sector remains in a structural uptrend despite the last month's action to the downside.

Same thing for the Nifty Bank Index. It's back into a range here, but remains in a structural uptrend. While neutral is most appropriate if prices are below our risk management level, there's little evidence that we want to be getting bearish the index itself.

Fast Moving Consumer Goods also reversed lower to close below our risk management level after making new highs last month. As we saw with Banks...we're off the highs, but prices are still in a structural uptrend and remain above the former highs of 29,000.

This month IT took a pause to digest some of the gains from the January breakout. A reversal next month with prices closing back below our risk management level of 15,090, then we want to be taking a more neutral approach like in the Nifty Bank and Financial Services Indexes.

Energy continues to be another sector we want to watch as it consolidates gains for a second month in a row. This sector continues to be driven by Reliance Industries which is 50% of the weighting, so we want to be watching the stock/sector to see if its consolidation resolves lower or higher, as that will either be a headwind or tailwind for the broader market.

The Nifty Auto Index which hasn't participated in the market's rally all year is now resolving its range to the downside. This lower low shifts the trend to sideways and suggests that we're likely to test our next downside target of 9,130 in October. This action continues to suggest a neutral/bearish stance is appropriate in this space.

The largest component of the Auto's sector, Maruti Suzuki, resolved its range lower, opening at the highs and closing at the lows. This is a major headwind for the sector and is one of the reasons why we believe a neutral/bearish approach is best.

The Nifty Media Index continues to be a laggard, gapping lower to start September and closing near the lows of the month. We're at a potential support level near 2,500, but overall there's little evidence that we want to be approaching this from the long side.

Same thing goes for the Nifty Realty Index which gapped lower to start the month and closed at the lows. We're at potential support near 215, but we don't want to be trying to pick a bottom here.

Moving onto Commodities which were pretty quiet overall. Crude Oil closed near the highs of the month as it approaches our upside target of 5,500.

Within Energy Crude Oil has been our favorite, but Natural Gas is now slowly beginning to perk up as it closes at 18-month highs. It remains rangebound, but this price action suggests that the bias is to the upside if we're above the February lows.

Last but not least, all of the currency pairs we track added to their gains versus the Rupee in September, though the Yen reversed and closed near the lows of the month. This has been the weakest of the pairs, but as bulls we don't want to see downside continuation in this next month.

The Bottom Line: These are the major changes we're seeing from a structural perspective. Yes there were some significant moves this month, but most of the long-term trends we track and have been discussing remain intact. What we'll be watching for in October is if the reversals in important sectors like Banks and Consumer Goods can find their footing or if there is downside continuation that pressures the major indexes further.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team