[Premium] Three Charts For The Week Ahead

JC Parets
September 7, 2020

We retired our "Five Bull Market Barometers" in mid-July to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

Last week we focused on global Bank stocks, EUR/INR, and Reliance.

Let's move into this week's topics.

1. First on our list is the S&P 500, which is testing its initial breakout level near 3,400. US stocks have been the leader for the last decade, so if this turns into a failed breakout that would likely put a damper on global Equities' ability to push higher in the near-term.

This was one of the major pieces of evidence we discussed in this weekend's high-level market update where we outlined why a more defensive approach remains best until we get more market data.

Click on chart to enlarge view.

2. Second on our list is the Nifty Energy Index. This is a lagging sector that's testing overhead supply near 16,500. We've been waiting for a broadening out of participation in this sector to help drive its next leg higher, but it has not occurred yet and now we're starting to see the opposite.

A lot of Energy stocks are pressing to new lows and with Crude Oil's downside resolution last week, so we're watching to see if this sector completely collapses from here. How it acts in the coming week(s) will help inform our broader market view.

3. The last thing we're watching is the change in character in the weakest names in the market. We've seen a lot of weak stocks in weak sectors consolidating sideways instead of breaking to the downside. That was just the type of environment we were in, but last week we saw some of these stocks, like ITC Ltd., resolving to the downside.

These breakdowns are a change in character and another piece of evidence that suggests we could be shifting into a more two-way environment where longs AND shorts work on an absolute basis. Longer-term, if the stock is stuck below 210, the bias is lower towards its March lows and ultimately 90.

In our view, these charts will help set the tone for this week and provide us information on how we should approach the market in the coming weeks.

Make sure to check out our "Trade of The Week", which is a short setup in Oil & Natural Gas Corp. Additionally, check out our broader market update and our top/down take on Vodafone Idea Cellular published this weekend to get our full view on the market's most important themes.

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

Allstarcharts Team

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