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.

Featured post

Broadening Top Megaphone Pattern on the S and P 500

The broadening top megaphone on the S and P 500 is resolving to the downside. 2200 is the lower side of the channel, where we are likely hea...

Thursday, 14 January 2021

Forecasting the S & P 500 - A Time Series Approach

 Using time-series data from 2015-2020, a forecast is made for the first 10 weeks of 2021. An Arima 2,1,2 model is fit using Gretl. Results are below:




    Forecasts:

    2021-01-03                   3753.66      

    2021-01-10                   3725.91      

    2021-01-17                   3726.87     

    2021-01-24                   3760.76     

    2021-01-31                   3783.72     

    2021-02-07                   3774.53     

    2021-02-14                   3761.59     

    2021-02-21                   3774.23     

    2021-02-28                   3800.34     

    2021-03-07                   3810.33      


Sunday, 10 January 2021

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning January 11

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

3825, 1.83%

Bullish

Bullish

Nifty

14347, 2.35%

Neutral **

Bullish

China Shanghai Index

3570, 2.79%

Bullish

Bullish

Gold

1850, -2.72%

Bearish

Bearish

WTIC Crude

52.72, 8.66%

Bullish

Bullish

Copper

3.69, 4.92%

Bullish

Bullish

Baltic Dry Index

1606, 17.57%

Bullish

Bullish

Euro

1.2221, 0.07%

Neutral

Neutral

Dollar/Yen

103.97, 0.75%

Bullish

Bullish

Dow Transports

12876, 2.95%

Bullish

Bullish

High Yield (Bond ETF)

109.01, 0.06%

Neutral

Neutral

US 10 year Bond Yield

1.12%, 20.35%

Bearish

Bearish

NYSE Summation Index

937, -1.68%

Bearish

Neutral

US Vix

21.56, -5.23%

Bullish

Bullish

Skew

139

Neutral

Neutral

20 DMA, S and P 500

3717, Above

Bullish

Neutral

50 DMA, S and P 500

3619, Above

Bullish

Neutral

200 DMA, S and P 500

3269, Above

Bullish

Neutral

20 DMA, Nifty

13836, Above

Neutral

Bullish

50 DMA, Nifty

13148, Above

Neutral

Bullish

200 DMA, Nifty

11130, Above

Neutral

Bullish

S & P 500 P/E

38.54

Bearish

Neutral

Nifty P/E

39.45

Neutral

Bearish

India Vix

20.64, 5.52%

Neutral

Bearish

Dollar/Rupee

73.34, 0.30%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

11

12

Bearish Indications

4

4

Outlook

Bullish

Bullish

Observation

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

The markets are about to begin a great depression style collapse. Watch those stops.

On the Horizon

Eurozone German GDP, UK - GDP, US - CPI, PPI

*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 were up last week, making new highs. Indicators are bullish for the week. The epic crash signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up and break out of the long term broadening top, suggesting a major top is imminent. The moment of reckoning is very near.  Technicals are about to track fundamentals and turn bearish. The market is yet to price in one of the worst earnings decline periods in stock market history. With extremely high valuations, a crash is on the menu. Low volatility suggests complacency and more downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 65% in our most recent rally of the lows in a similar 6 month period. After extreme euphoria for the indices, a highly probable selloff to the 3000 area is emerging on the S and P, and 10000 should arrive on the Nifty in the next few months. The FED is repeating the Japan experiment and the lost 3 decades in Japan (1989-2019) is set to repeat across the globe. SPX 1500 and lower in a year and we stay there till 2030, scary? The markets are very close to an epic meltdown and the SPX is headed way lower.

The markets are overvalued, overbought and out of touch with economic realities. Long term, the epic meltdown is set to continue resulting in a 5 year plus bear market with lot lower levels may be as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century as we make a major top in global equity markets. The market is looking like the short of a lifetime with topping action in the transports, other global indices, and commodities. High valuations continue.

The recent global virus epidemic (black swan) is likely to dent global GDP significantly and usher in a depression much faster than most think. The trend is about to change from bullish to bearish and the markets are about to get smashed by a rebounding dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. A 5-year deflationary wave has started in key asset classes like the Euro, stocks, and commodities amidst several bearish divergences and overstretched valuations.

We are entering a multi-year great depression. The markets are still trading well over 3 standard deviations above their long-term averages from which corrections usually result. Tail risk has been very high of late as interest rates plunge into a recession. The critical levels to watch for the week are 3840 (up) and 3810 (down) on the S & P 500 and 14400 (up) and 14250 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. Love your thoughts and feedback.

Sunday, 3 January 2021

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

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

3756, 1.43%

Bullish

Bullish

Nifty

14019, 1.96%

Neutral **

Bullish

China Shanghai Index

3473, 2.25%

Bullish

Bullish

Gold

1902, 0.98%

Bullish

Bullish

WTIC Crude

48.44, 0.44%

Neutral

Neutral

Copper

3.52, -1.19%

Bearish

Bearish

Baltic Dry Index

1366, 0.00%

Neutral

Neutral

Euro

1.2134, -0.57%

Bearish

Bearish

Dollar/Yen

103.24, -0.23%

Neutral

Neutral

Dow Transports

12507, -0.13%

Neutral

Neutral

High Yield (Bond ETF)

108.94, 0.36%

Neutral

Neutral

US 10 year Bond Yield

0.92%, -2.35%

Bullish

Bullish

NYSE Summation Index

954, -4.55%

Bearish

Neutral

US Vix

22.75, 5.67%

Bearish

Bearish

Skew

148

Bearish

Bearish

20 DMA, S and P 500

3698, Above

Bullish

Neutral

50 DMA, S and P 500

3586, Above

Bullish

Neutral

200 DMA, S and P 500

3235, Above

Bullish

Neutral

20 DMA, Nifty

13639, Above

Neutral

Bullish

50 DMA, Nifty

12917, Above

Neutral

Bullish

200 DMA, Nifty

10993, Above

Neutral

Bullish

S & P 500 P/E

37.85

Bearish

Neutral

Nifty P/E

38.45

Neutral

Bearish

India Vix

19.56, -2.04%

Neutral

Bullish

Dollar/Rupee

73.09, -0.61%

Neutral

Bullish

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

7

10

Bearish Indications

5

5

Outlook

Bullish

Bullish

Observation

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

The markets are about to begin a great depression style collapse. Watch those stops.

On the Horizon

Eurozone German employment data, CPI, US - 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 and the Nifty were up last week, making new highs. Indicators are bullish for the week. The epic crash signal is alive and well with retail, hedge funds, and speculators all in, despite the recent massive rally suggesting a major top is imminent. The moment of reckoning is very near.  Technicals are about to track fundamentals and turn bearish. The market is yet to price in one of the worst earnings decline periods in stock market history. With extremely high valuations, a crash is on the menu. Low volatility suggests complacency and more downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 65% in our most recent rally of the lows in a similar 6 month period. After extreme euphoria for the indices, a highly probable selloff to the 3000 area is emerging on the S and P, and 10000 should arrive on the Nifty in the next few months. The FED is repeating the Japan experiment and the lost 3 decades in Japan (1989-2019) is set to repeat across the globe. SPX 1500 and lower in a year and we stay there till 2030, scary? The markets are very close to an epic meltdown and the SPX is headed way lower.

The markets are overvalued, overbought and out of touch with economic realities. Long term, the epic meltdown is set to continue resulting in a 5 year plus bear market with lot lower levels may be as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century as we make a major top in global equity markets. The market is looking like the short of a lifetime with topping action in the transports, other global indices, and commodities. High valuations continue.

The recent global virus epidemic (black swan) is likely to dent global GDP significantly and usher in a depression much faster than most think. The trend is about to change from bullish to bearish and the markets are about to get smashed by a rebounding dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. A 5-year deflationary wave has started in key asset classes like the Euro, stocks, and commodities amidst several bearish divergences and overstretched valuations.

We are entering a multi-year great depression. The markets are still trading well over 3 standard deviations above their long-term averages from which corrections usually result. Tail risk has been very high of late as interest rates plunge into a recession. The critical levels to watch for the week are 3770 (up) and 3745 (down) on the S & P 500 and 14100 (up) and 13950 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. 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.