Half-Time Report
First up, let's take a look at a bubble chart that will paint us a nice picture of what has been unfolding in the market.
Click on the chart to zoom in.
Keep in mind that the x-axis notes the performance over the past quarter, while the y-axis notes the performance over the past 6 months. So anything appearing in the farthest left-hand top corner has been outperforming across both times frames. In this case, Metals.
So from the image above, what we can deduce is that PSU Banks, Small Cap100, Commodities, Mid-cap 100, PSE & CPSE have been the outperformers over the last six months.
On a quarterly basis, the indices outperforming the market have been Pharma, Media, and IT in addition to the list above.
The underperformers are the ones that have been crowding in the right-hand bottom corner. FMCG, Finserv, Consumption, Realty, Services, etc have been the beaten down spaces. By the way, Nifty 50 is around these bubbles as well. And why won't it be, it has been moving sideways for the most part!
Up next are a couple of important global charts that we're tracking.
Here's the EUFN monthly chart. We were talking about big base breakouts in the European markets as to how they've been doing nothing for decades and broke out only now. Now for that breakout to continue to hold importance, we're gonna want to see the EUFN hold on to its levels as well. The European market is finance-heavy. In that scenario, if the financial stocks are not doing well, then that's probably going to be a bad sign for equities in general.
20 is the important level to track here, and we want to see the price hold above that. But what do we have here? A bearish engulfing pattern on the monthly chart. That is most certainly not a positive. Moreover, this is coming at a level that has been a good resistance for close to three years.
Does this pattern spell doom's day for the market?
Not yet. But this is definitely one of the signals that we'd like to keep up top on our radar!
How can we talk about the market and not mention the Dollar? So here we have the US Dollar Index. Doing what it does best. Moving around in a range and adding to the mess in the market.
In line with the bearish engulfing in the EUFN, DXY is displaying a bullish engulfing pattern on the monthly chart. Again, not a good sign for the market. Remember that a rally in the Dollar is negative for stocks. Notice that the Dollar bottomed out in early 2018 as the risk-on assets peaked out around the globe. Similarly, the Dollar index rolled over as the market made a swift recovery in March 2020.
What we also have here though, is a range. For the past eight months, the Dollar index has been swinging between 93.50 and 89.50. So unless we see the Dollar break above 93.50, this trend continues to be sideways, just like the market.
Reversal patterns at important levels certainly hold importance. But in this case, it becomes imperative to see how the DXY reacts near 93.50.
Coming to the equities, we did a round-up of the outperformers and underperformers over the last six months. And here is the reveal:
Coming to Nifty 500, the stocks making the cut are as follows:
What are the next six months going to be like? We'll have to see about that. But a lot of indicators are at crucial levels and could go either way. With the monster rally that we witnessed last year, a pause was certainly on the cards. And while the broader markets have paused, we continue to see rotation among different market caps as well as sectors. Until a resolution, this rotation will continue to play out.
So for now, we're neither swimming nor drowning. We're simply floating.
Thanks for reading and please let us know if you have any questions.
Allstarcharts Team