[Premium] Three Charts For The Week Ahead

JC Parets
May 16, 2022

We retired our "Five Bull Market Barometers" in 2020 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 US Dollar Index, Nifty Small Cap 100 & Crude Oil (in Rupees).

Let's move into this week's topics. We have big important breakouts to track this week.

1. The first chart we're looking at is that of All India Market Capitalisation in the top pane, which covers about 5,200+ BSE listed companies, and the market capitalisation of the Top 10 companies in the bottom pane. Major indices like the Nifty 500, BankNifty, Nifty Pharma, and Nifty Media had made a Year to date low in March 2022 and are currently hovering above it. Similar to this, the All India market cap is also near its March lows.

Below this level, the market cap data will drag the broader market into structural damage.
It is interesting to see how the Top 10 stocks that significantly influence market movement are holding up.
We continue to monitor how the market behaves around this critical anchor point.

2. The second chart we're looking at is the BSE Smallcap Index. As we know, smallcaps are the risk appetite indicator for equities. The Nifty Smallcap 100 index, which covers the top 100 smallcap stocks, is already in a downtrend. To look at a deeper picture, we referred to the BSE  Smallcap Index, which has 918 constituent stocks.

Here the 261.8% Fibonacci level has acted as a support on the past two occasions. Additionally, Smallcap relative to Sensex is still holding in a range. The index below this Fibonacci level and ratio range will indicate a major deterioration of the market condition.

3. The third chart we're looking at is Nifty Energy. The index was outperforming all other sectors until last week when we saw the price take a hit. Currently trading below the 261.8% Fibonacci Retracement level, the price has breached its immediate support at 27,275.

This breach has been a sharp one, with a strong bearish candlestick in place. In a scenario where Energy is giving away its gains, the market as a whole could give existing levels of support. What would be important would be the price action this week. This is definitely an important development to track among the sectoral indices.

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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