Monthly Charts In Focus

JC Parets
March 3, 2022

At the end of every month, we rejoice. Regardless of the market sentiment, we rejoice. When the market closes, we rejoice.

That's a lot of joy one would say. But here we hold monthly charts in high regard. The exercise of going through monthly charts is therapeutic in a way that it helps you zoom out and get out of short-term messes. This is that time of the month when trends become clear.

As the month of March begins, we're here to perform the same exercise.

Read on to know what the market is saying.

We are in a market environment that is drastically different from what we saw in 2020. Human tendency is to recall the most recent event and give progressively less value to the events prior to that. Similarly, the 2020 market recovery is viewed as the best time and 2021 became a 'difficult year' for market participants. But just as we do in our analysis, everything is relative. 2021 was only relatively bad. If you pick up stocks that performed well, your portfolio would've performed well in 2021 as well.

The market that we're in today is one where the index may continue to struggle, but the stock-specific performances will take the spotlight.

But here, we've come to discuss the big picture. So let's get on with it.

The first chart we're interested in pointing out is possibly the best and most important chart to track on a global level.

Here is the CRB Index making new 7-year highs. We've been talking about the trend in Commodities has been clear and this is it right here! You can see where this trend is headed. There are certainly no signs of a halt in this current trend. So in its current state, this trend is here to stay! Sure a major chunk of the CRB Index is Crude Oil, but we're seeing a good move there for a while now!

The one chart that has changed drastically in the last month has been that of Gold. Suddenly, we're discussing Gold again. And in positive light! Isn't that new?!

Gold, my friends, has moved past its 2011 highs again. There is a strength that is building in this precious metal that will be extremely important to track as we go forward.

As long as the price trades above the 2011 highs, this is good to go. So Gold is back on the table!

Now if we were to compare the other asset classes with this recent development, where do you think they'd stand?

Here's what Stocks vs Gold looks like. This is a ratio of S&P 500 vs Gold. We can see that the ratio rolled over from the point that it turned away from in 2019. While the long-term trend is that of higher highs and higher lows, the short-term trend is pointing towards an underperformance on the part of the stocks. Which to be honest, seems to be playing out anyway.

The Dow is at a similar point with regards to the relative weakness in stocks vs Gold.

Another important ratio that's in favour of the commodities is Stocks/commodities.

Here we have the S&P500 vs the CRB Index. As can be seen, this ratio is making new 52-week lows. This translates to stocks underperforming the CRB Index. Another point in favour of the Commodities basket! Notice that the last cycle of stocks outperforming the commodities lasted longer than ten years! The same goes for the cycle prior to that whereby commodities were in the lead. So we're talking long-term trends here, folks!

Moving on to the India set up, one thing everyone wants to know is where is the market headed. There's really no clear answer. What is evident from the monthly charts too, is that the market continues to move sideways with certain sectors performing better than the rest. The levels to track remain the same. 19,800 up north and 15,700 down south.

Here are the Small caps 100in both rupee and dollar terms. Notice how the lower pane (rupees) is holding on to the support at 9,580. That's the level we're tracking because that is also the high made by the index in 2018. As long as the price trades above its 2018 highs, Small caps are safe. As soon as they give up those levels, we're in trouble.

We highlighted in our recent post that Metals were showing strength. Here's one more sector that's poking itself out of the ground. Here's Nifty CPSE showing some strength on a relative basis. The price is trying to stay afloat its 2018 highs. Look at the lower panel as well. The index is making a new 52-week high relative to Nifty50 ETF.

Among the commodities, Aluminum has taken the lead as can be seen in the chart below. The price has closed above 265 on a monthly time frame. This opens up the target of 350 in the weeks and months ahead. This metal has definitely taken leadership among the base metals.

Nickel is next in line! The price is displaying good momentum as commodities dominate the strong parts of the market.

We also had a surprise appearance from Dr.Copper. The price has recorded its highest monthly closing level! That's definitely a positive as Copper tries to find its place in the current commodity market cycle. If Copper joins the forces with other metals, we could see Base metals take off almost instantly! 750 is the level that we're tracking.

This was a short round-up of the interesting charts that we're seeing as we go about our month-end analysis. More to come when you join us for the monthly conference call next week! Stay tuned to hear our comprehensive view of the market across the globe.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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