[Premium] Three Charts For The Week Ahead

JC Parets
August 15, 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 S&P 500 vs. CRB index, equally-weighted Top 10 Nifty 50 stocks, Nifty Midcap 100 index

Let's move into this week's topics.

1. The first chart we’re tracking this week is Nifty Low Volatility 50 index relative to Nifty High Beta 50. Last year the less risker, low volatile names peaked out in March 2020. The entire run-up was a high beta chase, whereby we saw these high beta stocks outperform by a wide margin.

Currently, the ratio is trending higher in favor of low-volatility stocks. If we’re headed back to an environment where less risker assets are trending higher, we’d observe this ratio is trending higher as well. For now, it’s held support at a key reversal level. We’ll have to wait and see where we go from here.

Click on chart to enlarge view.

2.The second chart we’re looking at is the BSE Smallcap Index relative to Nifty FMCG. Smallcaps are more risker compared to FMCG, which is a defensive sector. Here the ratio lies at the confluence of 2018 high and 61.8% Fibonacci retracement level.

As we know, the small-cap peaked out in early 2018. Therefore, this resolution will provide us with a lot of information about the broader risk appetite, considering the ratio is at this critical inflection point.

3.The third chart we’re tracking this week is the Nifty Infrastructure Index. This week infrastructure index closed at a 13.5 year high. A new closing high helps in determining which sectors are comparatively doing well on an absolute basis.

If this level holds, then the next target to track would be 6,200. A continuation of this trend is undoubtedly a big positive for infrastructure industry groups like oil & gas, cement, construction, and telecom.

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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