We held our February Monthly Conference Call on 16th which our Premium Members can access and rewatch here.
In this post, we’ll share five of the most important charts along with JC’s commentary of them and a brief explanation for each.
1. “Needless to say, definitely a feather in the hat, for the Rupee bulls here, certainly.”
Click on chart to enlarge view.
The US dollar index has been weak for quite some time now, but its underperformance against Rupee is now intensifying. The currency pair breached the support level of 72.90. Now former resistance will act as a support at 72.20, as the principle of polarity comes into play, but we will be on the lookout for a breakdown below 72.20. That could then be a ripper!
2. “If there’s any chart that I could say- Hey print this one out, tape it to your wall, have your kid make a painting about it- this is it!”
This chart is sufficient to understand the market today. The reason that all the above line charts and moving lower is that we are in a risk-on environment. An environment where we are rewarded by riskier asset classes, unlike Treasury Bonds and Staples (that act as defensives) and Gold. The Aussie/Yen is another great Risk-on indicator. Here we inverted the chart to show how all the risk-off indicators are making new lows. This only supports our bullish thesis in stocks!
3. “If you’re not watching banks in India in general, you’re selling yourself short regardless of what country you live in“
Here are the financial sectors of India, the USA, and Europe. A bullish divergence can be seen in Bank Nifty while the US & European Financials were making lower highs and lower lows in late 2018. The market did go on to rally after that bullish divergence signal, which we would’ve missed had we not taken this index into account. Similarly Bank Nifty had hinted an early signal of the market crash with the bearish divergence that was in place in early 2020.
It is important to build a view of the market after taking a look at all the major indices since early signals could develop anywhere. If we manage t identify them in time, then we could be one step ahead of the others.
4. “We’ve seen the All Country World Index (ACWI) with the United States making new highs, now we’re seeing ACWI excluding the US also making new highs”
While the ACWI with the US has been making new highs since mid-2020, the ACWI excluding the US is now making new highs as well. This is another indicator of the broad-based participation in this market rally from across the globe. A market rally driven by just a couple of markets is not sustainable. But when all the markets join, you know that that will last longer!
5. “Here we have Financial Services making new highs on a relative basis.”
We were steering clear of the Financial Services Sector when Nifty was going through a short-term correction. With the breakout on a relative and absolute basis, Financials are back in the green with good momentum.
We hope this gave you some perspective on the topics we’re focused on in the current environment. There are clear trends across various asset classes that we want to continue taking advantage of.
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