[Premium] Three Charts For The Week Ahead

Last week we focused on  Private Bank vs. PSU Bank, Consumer Discretionary vs. Consumer Staples and Crude Oil

Let's move into this week's topics.

1. The first chart we're looking at is Nifty 500, with the centre pane showing percentage of Nifty 500 stocks above 50- day and the bottom pane displaying percentage of stocks above their 200-Day moving average. Nifty has been in a sideways consolidation mode for over four months. It is important to note that not every correction unfolds in a quick drop fashion. There are ‘time corrections’ as well. This is where the market corrects at a much slower pace but during a longer period of time. Both difficult in their own way of course. What we’re seeing in the market right now is a time correction.
50% of stocks are trading below their 200-day moving average, with over 65% trading below their 50-day moving average. It shows weakness in the longer-term trend. It is important to note that while the index's primary trend is still intact as long as it stays above 14,300, the index constituents are losing momentum.

2. In the second chart, we're looking at a custom index of the top 10 stocks of Nifty Smallcap as well as Nifty 50. Top weighted Smallcap stocks have remained strong compared to the top 10 large-cap Nifty 50 stocks in over two years. This is the first time we're observing downward acceleration in the small caps as well. This indicates that the current weakness in the Smallcap segment is gaining momentum. Nifty Smallcap 100 index is our indicator for risk appetite. The recent move shows that the primary trend is weakening in the early lag.

3. The third chart we’re looking at is that of VanEck Vectors Agribusiness ETF. This is an Agri based commodity ETF invested in the Global Agri companies that can be seen on the chart. The reason we’re looking at this chart is that Commodities has a much clearer path in terms of the trend compared to Equities.
And within commodities, the Agri based commodities are outperforming the others as can be seen from the new highs made in this ETF. Will the commodities continue to outperform Equities, or will the bearish sentiment of the Equities overshadow the commodities? When you look at the market cycles, it goes by BSC. Bonds --> Stocks --> Commodities. So yes, while that is a likely scenario, it helps to maintain the risk management levels as planned. For now, the strength in commodities continues to shine through.

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