[Premium] Three Charts For The Week Ahead

August 23, 2022

We retired our "Five Bull Market Barometers" in 2020 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 Nifty50, $DXY, $CEW & Natural Gas.

Let's move into this week's topics. We have big, important moves to track this week.

1. The first chart we're looking at is US Dollar Index ($DXY). Last week it had the highest closing in over two decades. If it breaks above the level of overhead supply at 108.50, the next target to track would be 121. In a scenario when DXY performs, emerging economies, stocks, commodities, and crypto will be under pressure.

Click on the chart to zoom in.

2. The second chart we're looking at is the All India Market Capitalisation index (BSE exchange-listed stocks) and the Nifty 500 Index. An interesting development occurred last week. The market cap index made a new all-time high before any major price index. It shows the strength of the current swing rally, which started in June. We have seen good performance from pockets like Auto, Capital Goods, Financials, etc.
Currently, the market cap index is in divergence with the Nifty 500. This disproportionation is a way to measure an extreme in a directional move and often implies a pause. Similar development earlier this year has resulted in a decline.
Going ahead, we need to check if the price trades above April '22 high to maintain a bullish outlook.

3. The third chart we're looking at is the Nifty 50 Equal Weight index. It shows a more precise level of participation as it gives equal weightage to all Nifty 50 stocks. Here price has an overhead supply from the 261.8% Fibonacci retracement level. This level has acted as resistance for the past three times. Is this time it's different? We need to close above 20,300 to hold a bullish view for the next leg of upside.