[Premium] Three Charts For The Week Ahead

JC Parets
January 4, 2023

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 $DXY, Gold and Auto

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 the S&P500 vs CRB index. For over a decade, stocks in the United States outperformed Commodities by a long shot.
In fact, Commodities underperformed for so long that many investors even forgot that they were an asset class.
Many investors got a tough reminder of this as the 60/40 portfolio of US Stocks and Bonds just had its worst year in a century. Meanwhile, here's how the ratio of Stocks to Commodities looks right now.
After breaking the long-term uptrend, stocks have been in a multi-year freefall relative to commodities. This immediately began after Crude Oil Futures briefly traded below zero. So now, looking at this new downtrend, does it look like it's over to you?

Click on the chart to zoom in.

2. The second chart we're looking at is CRB Index. CRB Index is the arithmetic average of commodity futures prices with monthly rebalancing. It consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat. Those commodities are sorted into four groups, with different weightings: Energy: 39%, Agriculture: 41%, Precious Metals: 7%, Base/Industrial Metals: 13%.
This index has held the critical 61.8% Fibonacci retracement level for over four months. If this level is taken out, then we will see a spillover effect on all related commodities.

3. The third chart we're looking at is Nifty Metal Index. Nifty Metal made a new all-time high this week. 2022 has been a volatile year for Metals, with a return of 22% and a drawdown of 35%. Metal Index relative to Nifty 100 is posing a big base breakout above 2018 highs. A clear relative strength breakout would be positive for the Metal Stocks. What's more telling, is that the price moved back below its April 2022 highs. Currently, it's trading above the previous high of 6,825. It will be important to track how the price reacts around the Blue sky zone.

In our view, these charts will help set the tone for this week and provide information on how we should approach the market in the coming weeks.

Also, 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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