[Premium] Three Charts For The Week Ahead

August 10, 2020

We retired our "Five Bull Market Barometers" in mid-July 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 Crude Oil, Cyclical stocks like Indian Hotels, and several stocks like Bharti Airtel failing to follow-through to the upside.

So far, all three of those factors haven't broken down so that's a positive. They're worth keeping an eye on this week as well.

Let's move into this week's topics.

1. We're watching closely to see if US Treasury Bonds break out to new highs. A failure to breakout here could signal that Interest Rates are beginning to stabilize, and money flowing out of the Bond Market could find a home in stocks. From an intermarket and asset allocation perspective, this is an important chart to keep an eye on.

Click on chart to enlarge view.

2. Mid and Small-Cap outperformance has been a big theme of ours for the last few months and remains so. With that said, prices of the Nifty Mid-Cap 100 are approaching potential resistance in the 16,000 area, so we want to see how prices react to this level. Do they begin to consolidate or are they able to push through on their first attempt?

How they handle this area will be important information in understanding the Equity market's overall short-term momentum.

3. Last, but not least, is the Nifty Realty Index and its largest component, DLF Ltd. They're both attempting to reclaim support, so a successful breakout here would signal to us that sector rotation continues to occur and support Equities in general. If even the weakest sectors/industries of the market aren't selling off, that tells us a lot about the type of environment we're in and how we need to be positioned.