[Premium] Three Charts For The Week Ahead

October 26, 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 $ACWX, $CEMB, Nifty Smallcap, Sugar

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 S&P 500. We say it's a bull market when more stocks go up than down. Stocks, mathematically, need to make new 3-month highs and then new 6-month highs before they can ultimately move on to make new 12-month (or 52-week) highs. With a new swing low in S&P 500, we've seen a collapse of new 63-day lows. For a confirmed bull market, we need expansion in S&P 500 stocks hitting new 63-day highs. A strong equity market in the U.S. is good news for the global risk-on sentiments.

Click on the chart to zoom in.

2. The second chart we're looking at is the ratio of Nifty 50 ETF (NIFTYBEES) versus Gold ETF (GOLDBEES). This ratio is an excellent indicator to confirm the directional move for Nifty 50. From the end of the last bear market in March 2020, Nifty had a clear outperformance against gold. The straight action became consolidation as the ratio hit 2018 and 2019 highs. Will nifty keep up with its upmove or continue the consolidation? This ratio will tell a lot about the risk attrition of Nifty 50.

3. The third chart we're looking at is the Nifty PSU Bank index. Last week it made a new 52-week high with momentum in the bullish overbought territory. A new high in a messy market environment shows the outperformance of PSU Banks against all financial industry groups as well as the broader Nifty 500. Since March 2020 lows, it has been in a strong uptrend. We need to continue riding it till it persists with higher highs.