About

Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin is a PhD and received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Time Series Analysis with GRETL

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Monday, 4 July 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning July 04

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

3825, - 2.21%

Bearish

Bearish

Nifty

15752, 0.34%

Neutral **

Neutral

China Shanghai Index

3388, 1.13%

Bullish

Bullish

Gold

1813, - 0.95%

Bearish

Bearish

WTIC Crude

108.46, 0.78%

Bullish

Bullish

Copper

3.61, - 3.39%

Bearish

Bearish

Baltic Dry Index

2214, - 5.02%

Bearish

Bearish

Euro

1.0429, - 1.20%

Bearish

Bearish

Dollar/Yen

135.21, 0.02%

Neutral

Neutral

Dow Transports

13289, - 1.91%

Bearish

Bearish

Corporate Bonds (ETF)

111.12, 0.94%

Bullish

Bullish

High Yield Bonds (ETF)

91.04, - 1.74%

Bearish

Bearish

US 10-year Bond Yield

2.89%, - 7.81%

Bullish

Bullish

NYSE Summation Index

-467, 13%

Bullish

Neutral

US Vix

26.70, - 1.95%

Bullish

Bullish

Skew

119

Neutral

Neutral

CNN Fear & Greed

Extreme Fear

Bullish

Bullish

20 DMA, S & P 500

3871, Below

Bearish

Neutral

50 DMA, S & P 500

4006, Below

Bearish

Neutral

200 DMA, S & P 500

4390, Below

Bearish

Neutral

20 DMA, Nifty

15827, Below

Neutral

Bearish

50 DMA, Nifty

16214, Below

Neutral

Bearish

200 DMA, Nifty

17157, Below

Neutral

Bearish

S & P 500 P/E

19.33

Bearish

Neutral

Nifty P/E

19.46

Neutral

Bearish

India Vix

21.25, 3.41%

Neutral

Bearish

Dollar/Rupee

78.95, 0.92%

Neutral

Bearish

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

7

6

Bearish Indications

11

12

Outlook

Bearish

Bearish

Observation

The S and P fell and the Nifty was unchanged last week. Indicators are bearish for the week.

The markets are correcting. Watch those stops.

On the Horizon

Eurozone – ECB decision minutes, US – FOMC decision minutes, employment data

*Nifty

India’s Benchmark Stock Market Index

Raw Data

Courtesy Stock charts, investing.com, multpl.com, NSE

**Neutral

Changes less than 0.5% are considered neutral

 


The S and P fell and the Nifty was unchanged last week. Indicators are bearish for the week.  Deflation is in the air despite the recent inflationary spike and the Chinese Yuan, government bonds, and commodities are telegraphing just that. Feels like a 2000-style recession trade has begun, with a decline in risk assets across the board. (My views don’t matter, kindly pay attention to the levels). The S&P 500 is well below the 200 DMA, after spending a very long time above it, and its 200 DMA is decliningMonthly MACDs on most global markets have gone negative after a long time. This spells trouble and opens up significant downside risk ahead. The market is near new lows for the year.

We have got bounces without capitulationThis suggests the lows may not be in and the regime is changing from buying the dip to selling the rip. We may get a final flush down soon. Risky assets are breaking to the downside across the board. Downward earnings revisions are likely soon.

The Fed is aggressively tightening into a recession. Tail risk while moderating is still high.  Deflationary busts often begin after major inflationary scares. The market has corrected significantly and more is left on the downside.

The transports are leading the next decline. The Dollar, market breadth, and bond yields are continuing to flash major warning signs despite the recent counter-trend move. The epic correction signal occurred with retail, hedge funds, and speculators all in, in the recent melt-up in January, suggesting a major top is in. The moment of reckoning is here.  Technicals are tracking fundamentals and have recently turned bearish. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the Great Depression (the 1930s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 3500 area is emerging on the S and P, and 14000 should arrive on the Nifty in the next few months. The FED is repeating the Japan experiment and the 3 lost decades in Japan (1989-2019) are set to repeat across the globe. The trend has changed from bullish to bearish and the markets are getting a reality check and getting smashed by rising rates and a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. Yield curves are about to invert yet again reflecting a major upcoming recession. 

The critical levels to watch for the week are 3840 (up) and 3815 (down) on the S & P 500 and 15850 (up) and 15650 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets.  High beta / P/E is getting torched yet again and will likely prove to be a sell on every rise. Gold is increasingly looking like the asset class to own in the upcoming decade despite the recent selloff. You can check out last week’s report for a comparison. Love your thoughts and feedback.

 

 

Monday, 27 June 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning June 27

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

3912, 6.45%

Bullish

Bullish

Nifty

15699, 2.65%

Neutral **

Bullish

China Shanghai Index

3350, 0.99%

Bullish

Bullish

Gold

1828, - 0.68%

Bearish

Bearish

WTIC Crude

107.06, - 1.73%

Bearish

Bearish

Copper

3.74, - 7.46%

Bearish

Bearish

Baltic Dry Index

2331, - 9.58%

Bearish

Bearish

Euro

1.0554, 0.53%

Bullish

Bullish

Dollar/Yen

135.23, 0.20%

Neutral

Neutral

Dow Transports

13548, 5.28%

Bullish

Bullish

Corporate Bonds (ETF)

110.09, 0.60%

Bullish

Bullish

High Yield Bonds (ETF)

92.65, 1.10%

Bullish

Bullish

US 10-year Bond Yield

3.14%, - 2.89%

Bullish

Bullish

NYSE Summation Index

-535, 0.6%

Bullish

Neutral

US Vix

27.23, - 12.53%

Bullish

Bullish

Skew

120

Neutral

Neutral

CNN Fear & Greed

Fear

Bullish

Bullish

20 DMA, S & P 500

3945, Below

Bearish

Neutral

50 DMA, S & P 500

4066, Below

Bearish

Neutral

200 DMA, S & P 500

4406, Below

Bearish

Neutral

20 DMA, Nifty

16026, Below

Neutral

Bearish

50 DMA, Nifty

16356, Below

Neutral

Bearish

200 DMA, Nifty

17196, Below

Neutral

Bearish

S & P 500 P/E

19.77

Bearish

Neutral

Nifty P/E

19.43

Neutral

Bearish

India Vix

20.55, - 9.70%

Neutral

Bullish

Dollar/Rupee

78.25, 0.41%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

10

11

Bearish Indications

8

8

Outlook

Bullish

Bullish

Observation

The S and P and the Nifty rallied last week. Indicators are bullish for the week.

The markets are correcting. Watch those stops.

On the Horizon

UK – GDP, Eurozone – German employment data, CPI, US – GDP

*Nifty

India’s Benchmark Stock Market Index

Raw Data

Courtesy Stock charts, investing.com, multpl.com, NSE

**Neutral

Changes less than 0.5% are considered neutral

 


The S and P and the Nifty rallied last week. Indicators are bullish for the week.  Deflation is in the air despite the recent inflationary spike and the Chinese Yuan is telegraphing just that. Feels like a 2000-style recession trade has begun, with a decline in risk assets across the board. (My views don’t matter, kindly pay attention to the levels). The S&P 500 is well below the 200 DMA, after spending a very long time above it, and its 200 DMA is decliningMonthly MACDs on most global markets have gone negative after a long time. This spells trouble and opens up significant downside risk ahead. The market is at new lows.

We have got bounces without capitulationThis suggests the lows may not be in and the regime is changing from buying the dip to selling the rip. We may get a final flush down soon. Risky assets are breaking to the downside across the board. Earnings revisions have been average, but any significant upward revisions appear unlikely.

The Fed is aggressively tightening into a recession. Tail risk while recently moderating is still high.  Deflationary busts often begin after major inflationary scares. The market has corrected significantly and more is left on the downside.

The transports are leading the next decline. The Dollar, market breadth, and bond yields are continuing to flash major warning signs despite the recent counter-trend move. The epic correction signal occurred with retail, hedge funds, and speculators all in, in the recent melt-up in January, suggesting a major top is in. The moment of reckoning is here.  Technicals are tracking fundamentals and have recently turned bearish. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the Great Depression (the 1930s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 3500 area is emerging on the S and P, and 14000 should arrive on the Nifty in the next few months. The FED is repeating the Japan experiment and the 3 lost decades in Japan (1989-2019) are set to repeat across the globe. The trend has changed from bullish to bearish and the markets are getting a reality check and getting smashed by rising rates and a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. Yield curves are about to invert yet again reflecting a major upcoming recession. 

The critical levels to watch for the week are 3925 (up) and 3900 (down) on the S & P 500 and 15800 (up) and 15600 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets.  High beta / P/E is getting torched yet again and will likely prove to be a sell on every rise. Gold is increasingly looking like the asset class to own in the upcoming decade despite the recent selloff. You can check out last week’s report for a comparison. Love your thoughts and feedback.

 

 

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.