[Premium] Three Charts For The Week Ahead

JC Parets
December 27, 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 Equally weighted BRICS, Dollar-denominated NIFTY and Nifty IT.

Let's move into this week's topics.

1.  The first chart we're looking at is MSCI ACWI ex-US ETF ($CWI). This index provides a broad measure of stock performance covering developed and emerging market countries outside of the U.S. As can be seen from the chart below, $CWI faced resistance at the 2007 high. Note that the 2007 high is the level of the global market crash. Cut to present, and we see that this year it peaked in June 2021, followed by lower highs. Last week, S&P 500 closed at an all-time high, whereas weakness in CWI shows the collective underperformance outside the U.S.

The direction in which this chart resolves will tell us a lot about the market that we will experience in the near future. This is definitely an important chart to track.

2. The second chart we're looking at is the BSE Consumer Discretionary vs. BSE Consumer Staples ratio.

Strength in Discretionary shows risk-appetite for more aggressive areas of the market, whereas when the ratio goes down, it indicates demand for low beta often higher dividend Consumer Staple stocks.

Currently, the ratio has been struggling near its 2018 highs for over two months. Risk across the market peaked out in 2018. So, it's crucial to watch how this ratio will behave around this level. We'd much rather be buying than selling, especially if we break above the 2018 highs.

3. The third chart we're looking at is the Equally weighted Index of Top 10 Nifty Metal stocks.

The index has been in a sideways consolidation for over eight months above the 161.8% Fibonacci extension. This consolidation implies accumulation as long as the price sustains above it. We'd want to look for the direction of price resolution moving out of this consolidation. In addition to the Discretionary breakout we discussed about above, a breakout in this consolidation would be a positive, and vice versa.

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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