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[Premium] Three Charts For The Week Ahead

January 12, 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 S&P 500, CRB, Nifty Metal

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 Dollar Index DXY and Emerging Markets Currencies CEW (Inverted). Note that DXY and CEW are inversely correlated, which means that if one is moving higher, the other is moving lower. Here, however, we have inverted the CEW to show just how similar (opposite) their moves are.
CEW has acted as a leading indicator for the Dollar Index peaks we've witnessed over the past few years. Notice that the peaks came through in CEW before they were in place in DXY.
Currently, $DXY finds its footing at 103 after experiencing significant downside pressure in recent weeks. Price currently tests a critical level of former resistance marked by a shelf of former highs. With so much price memory here, this area represents a logical level for demand to absorb the supply. So far, that's the case as former resistance has become support. If the DXY begins to mean revert in the coming days, we can expect risk assets to come under increased selling pressure. On the other hand, a downside violation of this critical level will likely result in a tailwind for stocks and risk assets.

Click on the chart to zoom in.

2. The second chart we're looking at is MCX Natural Gas. It's the Back- adjusted contract data that adjusts previous contracts continuously to remove the roll gap due to price differences for different contracts.
Natural Gas is currently testing the 2020 lows at 285. It's the lowest level seen in decades, with the oversold reading on the momentum indicator. Will it curtain the supply? In the event that we witness follow-through, the next target to track would be 240.

3. The third chart we're looking at is the BSE IPO index. This index consists of newly listed IPO stocks with top stocks, including Life Insurance Corporation of India, Adani Wilmar Ltd, and Metro Brands Ltd. In October 2021, its's divergence from the Nifty 100 gave us an early signal of change in the market's risk appetite. Since then, it has been on a downtrend. Last Month after 8 Month long consolidation, it made a new 52-week low. It shows the weak appetite for the risk segment of the market. Here 2020 highs would be the critical level to watchout for.

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