[Premium] Three Charts For The Week Ahead

JC Parets
November 1, 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, Nifty Small Cap 100 and Consumer Durables / FMCG.

Let's move into this week's topics.

1. The first chart we’re looking at is that of the Dow Twins. Charlie Dow taught us very early on that in order to confirm a market trend, the indices should confirm each other. Well, we finally have that confirmation. For a while now the Dow Jones Transportation Average was not confirming the highs that we were witnessing in the Dow Jones Industrial Average.

But over the end of the last month, we got that as well. Now, this confirms the bullish trend in the market. With this in place, we can expect the market rally to march on ahead. But without this, the narration of a market rally will fumble.

2. The second chart is our risk-on indicator currency pair- AUD/JPY. When this ratio moves higher, market participants are looking at an increased risk appetite and vice versa.

As of October's closing the currency pair is trading close to its February 2018 highs. 2018 high is a significant level to track since risk assets peaked around the globe in 2018. And as can be seen from the chart below, the price memory close to 88.50 is extremely strong.

The takeaway from here is that the risk-on indicator is moving higher pointing to the increased risk appetite of the market participants at present. This adds to the narration of the bull market that is unfolding at present.

3. The third chart we’re tracking is Bank Nifty on the monthly timeframe chart. The price is making an all-time high and is displaying strength at a time when the broad Indian market is under slight pressure.

This new all-time high suggests that the bullish trend is in place and that this particular sector is taking the lead. Financials taking the lead is a cyclical shift in the market cycle. We'd like to follow this chart to see the extent of the move that we could see in Bank Nifty.

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

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