Weekly Market Outlook: A Holistic View of Markets, Sectors, and Turnaround Picks

Multi-Asset Ratio Analysis

In the recent Nifty 50 chart (0.1% Daily TF), a High-Pole pattern has emerged, signaling a potential follow-through sell pattern. The current open bearish count stands between 21,547 and 21,099. However, it's important to note that the formation is above the 20-column EMA, suggesting a bullish trend, thus rendering the Nifty setup neutral.

On the Gold/Nifty chart, strength is evident as the ratio trades above the 20-column EMA and has formed a base formation (pattern re-test). This could signify a looming correction in the equity markets if gold continues to outperform.

USDINR/Nifty is showing signs of forming a base, although the ratio trades below the 20-column EMA, indicating some relief in the market.

Nifty GS Composite/Nifty has formed pattern re-test with two active bullish counts. Presently, the ratio trades below the 20-column EMA. However, a move above this EMA could shift the chart setup to bullish, posing potential concerns for the equity markets.

Analysis of Nifty 50

On the Weekly TF OHLC chart, divergence is evident with the Market Structure High (MSH) pattern, signaling a potential slowdown in momentum and urging caution. Nifty is expected to trade within the broader range of 21,000 to 22,500, with a more aggressive trading range between 21,500 and 22,500. Traders may consider shorting CE as momentum weakens, and explore a strangle strategy for April expiry within the conservative range.

Analysis of Gold

The Goldbees chart on a 0.15% Daily TF indicates strength, with a Count Cluster of 56 very close to the current market price (CMP). The last formation observed is an Anchor FT. If Gold continues to outperform Nifty and equity markets show a slowdown in momentum, investing in Goldbees could present a promising opportunity.

Breadth Analysis of F&O Basket

The breadth of 3% PnF charts is declining, posing a concern for equity markets. We should refrain from taking long positions until the breadth reaches oversold conditions. The most favorable risk-to-reward setup for shorting opportunities will occur when the breadth of 1% charts approaches the 50 zone while the breadth of 3% charts continues to fall. As long as the breadth of 3% charts is decreasing, it's a cautionary signal for trades involving leverage.

Explanation for readers who have come across the concept of breadth analysis for the first time:

"Breadth" refers to the number of stocks or securities participating in a particular market move. In this context, the breadth of PnF (Point and Figure) charts measures the extent of participation across different price levels. When the breadth is falling, it suggests that fewer stocks are contributing to the market's movements, which can indicate weakening market conditions. We as traders often use breadth analysis to gauge the overall health of the market and to identify potential trading opportunities.

Outperforming and Underperforming Sectors w.r.t Breadth

Sectors including PSE, Realty, Infra, Energy, and Auto are outperforming the benchmark index and are also approaching oversold conditions on 1% PnF breadth. Should the market see a bounce from current levels, these sectors might be the first to rally. However, given the current weak market sentiments, it's prudent to watch for underperforming sectors that are nearing overbought conditions for a better risk-reward opportunity. Currently, there are no sectors underperforming while also approaching the overbought zone, leaving us as trader and investor in a wait-and-watch mode.