[Premium] Three Charts For The Week Ahead

Last week we focused on US 30-Year Yields, the Nifty Mid-Cap 100 Index, and the Nifty Realty Index and its largest component, DLF Ltd., trying to gain their footing.

Let's move into this week's topics.

1. We're watching the US Dollar Index closely due to its intermarket implications. The Dollar is oversold and momentum is diverging positively, but it's unable to get any sort of traction in the near-term. We remain bearish the US Dollar and would be fading any strength, but a complete collapse here with no bounce would have big implications for Emerging Market stocks, Metals, and other cyclical assets. We're keeping a close eye on this development.

Click on chart to enlarge view.

2. The Large/Small-Cap ratio is oversold for the first time since its decline began, so we're watching to see if prices stabilize at all or just continue to the downside. Continued weakness in this ratio (strength in Small-Caps) would likely signal further upside in the major nifty indices as participation broadens out further.

3. Going along with our theme of "watching the weakest," as we have for the last few weeks, we want to keep an eye on the Nifty PSE Index and its largest component, NTPC Ltd. Both of them have been flirting with former support at 2,650 and 96, respectively, and have not broken down yet. The fact that the weakest stocks and indexes are not breaking down speaks to the strength of stocks as an asset class. We're watching to see which direction these consolidations ultimately resolve.

In our view, these charts will help set the tone for this week and provide us information on how we should approach the market in the coming weeks.

Make sure to check out our "Trade of The Week", which is a long in the Consumer Goods' space, as well as our new "Top/Down Take" weekly post discussing Yes Bank.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team