[Premium] Three Charts For The Week Ahead

JC Parets
December 6, 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 the Shanghai Composite, the Euro/Rupee, and the Nifty 100/Nifty Mid-Cap 100 ratio.

Let's move into this week's topics.

1. The first chart we want to look at is Nifty Auto, which is approaching a potential resistance level near 9,200 as RSI reaches one of its highest levels in years. How the market reacts (or does not react) to this level will tell us a lot about the next few weeks of market action.

If we're seeing Nifty Auto press to new highs, then we're likely in an environment where the market, in general, continues to grind higher. If it stalls or begins correcting, then we're likely in an environment where the market, and equities around the globe, are pressing pause.

Click on chart to enlarge view.

2. The second chart we want to look at is the Nifty PSE Index. Similarly to the Nifty Auto Index, we're watching this sector to see if the market is going to continue extending itself to the upside.

Rashmi and I were speaking earlier today about what we're seeing in the market and both pointed out that when even the weakest stocks in the market are participating and making new highs...we're likely closer to the end of the move than the beginning (from a short-term perspective).

We'll see if the market agrees with us or not, and we'll know by keeping an eye on strong sectors like Nifty Auto and the weakest sectors like Nifty PSE.

3. The third chart we want to look at is the US Dollar Index, which continues to melt lower. It appears that the next stop is the 2018 lows near 88.50, but how quickly we get there will likely have a big impact on equities.

Stocks and the US Dollar have a negative correlation right now, so weakness in the Dollar remains a tailwind for the market right now...and how stocks react when the Dollar finally does catch a bid will be an important tell about what's next.

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.

Also, make sure to check out our other weekly post, "Trade Of The Week."

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

Allstarcharts Team

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