[Premium] Three Charts For The Week Ahead

JC Parets
August 21, 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 Low Volatility relative to High Beta, Smallcap relative to FMCG, and Nifty Infrastructure Index.

Let's move into this week's topics.

1. The first chart we're tracking this week is MCX iCOMDEX Composite Index. It consists of 11 commodity futures traded on MCX. This index closed below the February high after facing overhead resistance with bearish momentum divergence. This is a key risk asset, and given Nifty Metal has fallen 9% in the last two weeks, we're watching to see if buyers step in and help stabilize the price or if this selloff escalates.

Going forward, it would be challenging to make a positive case for the commodities if the support at 11,000 is breached. Continued weakness could have a medium-term negative impact on this space.

Click on chart to enlarge view.

2. The second chart we’re looking at is a relative strength chart of Equally weighted Nifty 50 Top 10 stocks vs. Equally Weighted Nifty 50 Index. This ratio points towards the environment where the top 10 stocks take the market higher than the remaining Nifty 50 stocks. It shows a lack of participation and tapered risk appetite.

In the event that this ratio chart continues moving higher, we know which stocks are moving the market higher and, as a result, can focus on those while the trend lasts.

3. The third chart we’re looking at is the Nifty FMCG Index, which made a new all-time high on an absolute basis. What’s worth noting is the strong momentum in an environment where weakness persists throughout the market. The weak performance of FMCG on a relative basis has been a data point in favor of risk-on sentiments. If FMCG continues to move above the key level of 39,600, it would be evidence of risk-off sentiments and relative outperformance of FMCG.

We know that FMCG is a defensive sector and tends to outperform the market in a largely weak environment. So it's no surprise that we're seeing some strong moves coming this way.

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

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