Weekly Market Outlook: A Holistic View of Markets, Other assets and Sectors | Week-13

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. DTB @ 22158 will complete the bear-trap pattern and with this the setup will turn Bullish from 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 a strangle with the broader range of the Index. We may have a volatile last week of March but strangle of April’s expiry can yield positive outcome.

Analysis of Gold

The Goldbees chart on a 0.15% Daily TF indicates strength. The last formation is an ABC Pattern with HP. Anchor column is suggesting momentum where as High Pole (HP) is suggesting supply. If Gold continues to outperform Nifty and equity markets show a slowdown in momentum, investing in Goldbees could present a promising opportunity above HP negation level.

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. We will have the most favorable risk-to-reward setup for shorting opportunities now as 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. We may see one round of selling in the coming week. However the view is not aggressively bearish.

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 in neutral territory of 3% PnF breadth. Should the market see a bounce from current levels, these sectors might be the first to rally. If our approach to markets are ‘Long-Only’ we should look for buying opportunity in Outperforming sectors where breadth has come to neutral territory on 3% Breadth charts. In my Pre-market capsule, published everyday on newsletter.thenoiselesstrader.com, I will cover this further on how to approach breadth during the week.

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