[Premium] Three Charts For The Week Ahead

JC Parets
November 22, 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 Global Market indices, Nifty IT and Nifty Pharma/ Nifty 100.

Let's move into this week's topics.

1. The first chart we’re looking at is Nasdaq 100 vs the Dow Jones Industrial sector. So what we have here is the dot-com bubble which went kaput in March 2000. The Nasdaq has been underperforming the DJIA ever since and hasn't had much of an opportunity to get out of that underperformance. Until now.

The ratio is back to where it was in March 2000 and it will be interesting to see how the price reacts to this historic level going forward. It has taken all these years for the ratio to get back to those prior highs. How this chart develops as we go will play a crucial role in looking at the current market scenario.

2. The second chart is Nifty 50 Top 10 Constituents vs Nifty 50. Over the past couple of weeks, we've seen Nifty50 halt and take a break. While we have witnessed a minor correction since the highs, we can see what it is that the drawing the index lower.

Nifty 50's top 10 constituents together account for 58% of the entire index. So if these are going down, it's hard to make a positive case for Nifty50.

This ratio helps us in gauging the risk appetite among the market participants. The Top 10 constituents are holding on to their support at present. We're going to observe this level to understand where the current market is headed.

3. The third chart we’re tracking is Nifty IT and Nifty Pharma.

We discussed these two indices last week and at this point Nifty IT is one of only two thematic indices that is exhibiting strength, closing at a two-week high. The risk management level that we're tracking for Nifty IT is 34,250.

On the contrary, Nifty Pharma broke below its sideways consolidation and closed at a new six-month low. The index is exhibiting signs of weakness as it breaks down on an absolute and relative basis. Depending on where this is headed further, Pharma could be back on the 'short list' after its magnificent performance over the last two years.

In our view, these charts will help set the tone for this week and provide us with 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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