[Premium] Three Charts For The Week Ahead

JC Parets
July 25, 2021

We retired our "Five Bull Market Barometers" in mid-July last year 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, Nifty Small Cap 100 & Nifty Realty/Nifty 100.

Let's move into this week's topics.

1.  The first chart we're looking at is Nifty 50 vs. the Emerging Market($EEM) ETF. In this relative strength chart, we can see the outperformance of Nifty 50 against the Emerging Markets. While the markets have remained largely messy, we've seen great resilience on the part of the Indian market.

Here, the ratio has broken above the same level where it began to deteriorate in May 2019.

Last week we discussed the weakness of the Emerging market against the developed market. But within emerging markets, relative strength lies in India. With this breakout, we could see the continuation of this trend. What we're keeping an eye on is if this gives us any early signs of resumption in the underlying trend.

Click on chart to enlarge view.

2.The second chart we're looking at is S&P 500. The trend has been positive, however, breadth has been a concern. In this scenario, we'd like to see how much further this trend can extend before we see a resurgence in trend or breadth or vice versa.

In terms of the indicator, we've seen the RSI stick to the bullish regime. With respect to the price, the long-term trend continues to be higher. 4,100 will act as the risk management level, and the target to track would be 5,290.

3. The third chart we're looking at is Nifty IT relative to Nifty 100. We've been talking about the strength in Nifty IT for quite some time now. What we're tracking right now is the relative strength chart. The line chart is now approaching a level where the ratio has halted before on three occasions.

The ratio could halt here or move higher but so far, the indicator hasn't revealed greater strength in this move compared to the prior attempts.

It will be interesting to see how the individual constituents react at this level.

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.

Also, make sure to check out our other weekly post, "Trade Of The Week."

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

Allstarcharts Team

Filed Under: