[Premium] Three Charts For The Week Ahead

August 17, 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 S&P 500, Global Financials & Nifty Consumption.

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 Nifty 50 along with the A/D line. The advance-decline line is basically just that, the number of stocks advancing vs the number of stocks declining. Well well well, what do we have here?

The advance-decline line is making a new high! This is even before the price has reached close to all-time highs. While this is not a 'be-all end-all' signal of market sentiment/trend, it certainly acts as an added tool indicating the strength of the current trend. And that is what we're taking from this chart.

Click on the chart to zoom in.

2. The second 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. If that's history's suggestion, then the most recent failed move in CEW should ideally reflect in the peak formation of the DXY, shouldn't it?

And if DXY does temper down, then we know that Stocks, Cryptos and Commodities have a lot to gain out of that move!

3. The third chart we're looking at is Natural Gas. The price is now moving past the resistance level of 685. With the close last week we saw the price break out from the overhead supply zone. What's left to be seen is whether the price sustains above these crucial levels to continue to follow through.

In the event that we witness follow-through, the next target to track would be 1,035. The price has found it difficult to get past this level over the past four months so it will be interesting to see how this plays out.