[Chart(s) Of The Week] All Eyes On The Weakest

Here's the Nifty Auto Index, which led to the downside and has yet to participate in the recent bounce. With that said, today's closing price was above its former lows at 4,595 and confirmed a bullish momentum divergence, suggesting that as long as prices are above that level then the near-term bounce can continue.

Click on chart to enlarge view. 

Here's another weak sector, Nifty Media, also confirming its own bullish divergence and failed breakdown. As long as prices are above 1,010 there, then the bias is higher.

PSU Banks have yet to close above their former lows at 1,300, but again, if they do that would be a positive and suggest further upside.

The point here is that a continued bounce for the weakest areas of the market shows some risk appetite among market participants in the near-term and suggests the recent rally in stocks as an asset class has some legs.

However, if these bullish divergences and failed breakdowns do not produce the fast counter-trend moves that history suggests we should expect...then look out below.

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Allstarcharts Team