[Premium] Three Charts For The Week Ahead

JC Parets
August 8, 2021

We retired our "Five Bull Market Barometers" in mid-July last year 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 Emerging Markets Small-Cap ETF, Emerging Market ETF, S&P BSE DOLLEX 30,  Nifty Metal Index.

Let's move into this week's topics.

1. The first chart we're tracking this week is S&P 500 vs. CRB index. Last year, stocks peaked relative to commodities at the time when crude oil was trading below zero! When price action reaches extremes, it's usually at critical inflection points that mark major trend reversals. In this case, it sparked the beginning of a Commodity Supercycle.

Our line in the sand in the CRB Index is 200. If we're above 200, it's tough to be bearish commodities.

Click on chart to enlarge view.

2. The second chart we're looking at is a custom index of equally-weighted Top 10 Nifty 50 stocks. This week it closed above the February '21 high. It shows that this time participation from the top 10 constituents led to the breakout in the Nifty 50 index. The past few months have been a choppy mess for Nifty 50.

It would be interesting to see the price action in top-heavy weighted names. How it acts in the coming week(s) will help inform our broader market view.

3. The third chart we're tracking this week is the Nifty Midcap 100 index with the ratio chart of Nifty Midcap relative to the Nifty 100 index. Midcap index facing resistance from 161.8% Fibonacci extension level of January 2018 High - March 2020 low. Fibonacci Extensions help when looking for upside targets within an ongoing market uptrend, which often acts as resistance.

The midcaps have been the outperformer against the largecap since the covid bottom. Currently, the ratio is at 61.8% Fibonacci retracement level of a similar January 2018 High - March 2020.

This confluence of resistance gives us an early pause signal for the index to digest recent gains and rotation of money in these market segments.

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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