[Premium] Three Charts For The Week Ahead

September 6, 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 Nifty Financial Services along with top 10 constituents, Nifty IT and Natural Gas.

Let's move into this week's topics.

1. The first chart we're looking at is Thomson Reuters/CoreCommodity CRB Index monthly chart. The CRB index holds above its former 2018 high, near 206.50-207, signifying a major shift in the primary trend. From an Intermarket perspective, our outlook is positive for commodities as long as the index is above the key level.

We've been talking about a commodity supercycle for some time now, and that view hasn't been negated. So as long as the price holds above the level of 207 our view remains intact.

Click on chart to enlarge view.

2. The second chart we're tracking is the Nifty Energy Index and Reliance Industries. After a sideways consolidation for over a year, Reliance closed at an all-time high. Reliance is a top heavyweight constituent in Nifty Energy as well as Nifty 50. This development is indicative of mega-cap dominance in the market movement. We will closely observe the September 2020 high in Reliance to see if this breakout sustains going forward. With Energy looking to breach its overhead resistance, we're watching this space to see if its a good time to be invested in Energy.

3. The third chart we're looking at is the ratio chart of Nifty Bank vs. Nifty 50 Index. We've discussed the early sign of outperformance in Nifty Financial services. For the sustenance of breakout in Financial, participation from the current laggard industry group is crucial, i.e., Banks. This relative strength chart shows the underperformance of Nifty Bank relative to Nifty 50.

We're watching the level ~2.17. It's hard to be constructive Nifty Bank and financials in general if it continues to trade below this level.