[Premium] Three Charts For The Week Ahead

Last week we focused on MCX iCOMDEX Composite, Nifty Bank, Nifty Auto, and Nifty PSU Bank Index

Let's move into this week's topics.

1. The first chart we’re looking at is Nifty Financial Services Index. This week we saw significant selling pressure in equity markets. Nifty Financial remained resilient in overbought momentum territory and closed on a positive note. Going ahead, we're closely monitoring the Fibonacci level of 161.8% at 18,910. If price continues to move above the key level, it would be evidence of relative outperformance in the financial sector.

2. The second chart is Nifty Smallcap 100 Index and Smallcap relative to Largecap (Nifty 100). Smallcap made a higher high after a pause in August, whereas its ratio showed the weakness against the largecap. The strength of smallcap against largecap was the theme of the market rally since the March '20 decline. It would be a significant risk for smallcap / microcap stocks to see this ratio continue to resolve lower.

3. The third chart we’re tracking is S&P BSE Consumer Durables relative to Nifty FMCG. This week, the ratio broke above December 2007 high and made a new all-time high. When Consumer Durables stocks are outperforming, and FMCG are underperforming, we’re typically in a market that is rewarding risk-seeking behavior. We know that FMCG is a defensive sector and tends to outperform the market in a largely weak environment. The bottom line is this breakout is bullish for the consumption theme. Stocks are likely moving higher if this ratio sustains above 2007 highs.

In our view, these charts will help set the tone for this week and provide us with 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