Monthly Candlestick Preview

Commodities as an asset class remain a mess, so it's important to be looking at individual Commodities as opposed to just the broader asset class. The disparity of performance between Metals, Energy, and Agriculture is significant, even within these sub-areas.

Here's Crude Oil making a new closing low, still stuck below the bottom of its long-term range near 1,900. As long as prices are below that then the trend remains lower and a long-term target near 300 is possible.

Gold made a new monthly closing high, but after five months of upside may be due for some consolidation of gains. Prices failed to close above 45,000 which was our upside objective, suggesting some near-term consolidation before further upside. 45,000 remains the level to trade against in Gold.

USD/INR made new all-time monthly closing highs in April but failed to follow through in May. As long as prices are above 75 then the long-term trend remains higher, but bulls want to see some upside acceleration occur soon or this breakout will be at risk of failing.

So Bonds are in an uptrend. Commodities are a mess. And the Rupee remains in a downtrend.

Let's move into Equities.

The Nasdaq 100 is a mix of the three major factors that continue to lead. US stocks. Technology-heavy areas. And Large/Mega-Cap focused. As a result, there's no surprise it held its long-term support/resistance level near 181. If we’re above that, the world is not ending.

In fact, the Nasdaq 100 went out just 16 cents from new all-time monthly closing highs. According to my calculator, $QQQ missed an all-time high this month by just 0.073%.

On the other hand, Small-Cap stocks in the US continue to struggle. Our key short-term level for the Russell 2000 is 126, so we have no interest in shorting them if we're above that. Bigger picture, which is what these monthly charts are for, 117.50 is the more important level. Think of 117.50 as the equivalent to 181 in $QQQ. That’s the point of no return. Above that and I think we’re good.

Let's look at the equivalents to these indexes in India.

Here's the Nifty 50 holding above its 2015-2016 highs near 8,900. As long as prices are above that, it's hard to be too bearish. It's below that level where stocks are in trouble, for now sideways action continues.

The Nifty Small-Cap 100 remains at risk though, stuck below resistance near 4,700 but well above support at 2,700. Long-term 4,700 is the level that matters. If we're below that, then downside risk remains elevated.

Large and Small-Caps are clearly NOT on the same page in India. This remains a risk for Equities as an asset class longer-term, as market participants are showing weak risk appetite. With that said, if you need to own stocks, the message is clear. Own the Large-Caps.

Financials remain important all over the world.

We don’t have bull markets in America without Financials. If $XLF is above 21, I think that’s tactically a good thing for the bulls. Bad things are happening to equities globally if Financials are below their 2015 highs. At this point, we’re more so in no man's land, although on the offensive side of mid-field.

European banks are the problem for the bulls. What else is new? If the Nasdaq is Lebron, European Banks are J.R. Smith (for those unfamiliar with the reference, it's bad to be a J.R. Smith).

Here are Indian Financials, which are still holding above their 2015-2016 highs and Fibonacci support near 8,900. If they're above 8,900, that's definitely a positive for market bulls.

Despite all the noise, some stocks continue to perform. That's where we want to focus our attention.

Reliance Industries closed near the highs of the months and is only above 10% off its all-time highs. Right now it's stuck in a sideways trend, but if prices see follow-through above 1,460 then its uptrend is likely to continue with a target near 2,200.

Bharti Airtel is another stock pressing up against all-time highs. This is a massive base in the stock and a move above 530 would confirm the start of a new long-term uptrend. Despite the volatility, there remains opportunities out there in stocks showing positive momentum characteristics and relative strength.

Last, but not least, is the Nifty Pharma Sector which we've liked since November and continue to like longer-term.

Sun Pharma has been unable to reclaim former support/resistance near 475 just yet, but if and when that does happen, it'll be a major tailwind for the sector at large. This stock is one to watch in May as it attempts to confirm the start of a new uptrend by closing above 475.

Hopefully, this post highlights how Monthly Charts help us focus on the long-term trend when volatility on lower timeframes picks up. This exercise is important and worth doing every month, but its value really shines during times like this when things get messy.

What's clear to us is that Bonds are in an uptrend, the Rupee is in a downtrend, and Commodities and Stocks remain a mixed bag where we need to be very selective before putting capital to work.

[hide_from accesslevel="premium-india"]If you enjoyed this post and want access to all of our premium research, start a 30-day risk-free trial. Or sign up for our "Free Chart of the Week" to receive more free research like this.

[/hide_from]

What are your key takeaways? Let us know! 

Allstarcharts Team