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

This video shows key time-series analyses techniques such as ARIMA, Granger Causality, Co-integration, and VECM performed via GRETL. Key dia...

Sunday 29 April 2018

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 30

Indicator
Weekly Level / Change
Implication for
S & P 500
Implication for Nifty*
S & P 500
2670, -0.01%
Neutral
Neutral
Nifty
10692, 1.21%
Neutral **
Bullish
China Shanghai Index
3082, 0.35%
Neutral
Neutral
Gold
1323, -1.11%
Bearish
Bearish
WTIC Crude
68.10, -0.44%
Neutral
Neutral
Copper
3.05, -2.84%
Bearish
Bearish
Baltic Dry Index
1374, 14.49%
Bullish
Bullish
Euro
1.2136, -1.37%
Bearish
Bearish
Dollar/Yen
109.09, 1.38%
Bullish
Bullish
Dow Transports
10549, -0.28%
Neutral
Neutral
High Yield (ETF)
35.87, -0.33%
Neutral
Neutral
US 10 year Bond Yield
2.96%, 0.20%
Neutral
Neutral
Nyse Summation Index
205, -21.74%
Bearish
Neutral
US Vix
15.41, -8.71%
Bullish
Bullish
Skew
128
Neutral
Neutral
20 DMA, S and P 500
2654, Above
Bullish
Neutral
50 DMA, S and P 500
2688, Below
Bearish
Neutral
200 DMA, S and P 500
2611, Above
Bullish
Neutral
20 DMA, Nifty
10460, Above
Neutral
Bullish
50 DMA, Nifty
10375, Above
Neutral
Bullish
200 DMA, Nifty
10266, Above
Neutral
Bullish
India Vix
12.02, -7.11%
Neutral
Bullish
Dollar/Rupee
66.51, 0.47%
Neutral
Neutral


Overall


S & P 500


Nifty

Bullish Indications
5
8
Bearish Indications
5
3
Outlook
Neutral
Bullish
Observation
The S and P 500 was unchanged and the Nifty rallied last week. Indicators are mixed.
The markets have made important tops. Time to watch those stops.
On the Horizon
Australia – RBA rate decision, China PMI, UK- PMI’s, U.S – Home sales, ISM PMI’s, Oil inventories, FOMC rate decision, Employment data, Canada – Poloz speech, PMI   
*Nifty
India’s Benchmark Stock Market Index
Raw Data
Courtesy Google finance, Stock charts, investing.com
**Neutral
Changes less than 0.5% are considered neutral


stock market signals april 30
Chart courtesy David Rosenberg 

The S and P 500 was unchanged and the Nifty rallied last week. Indicators are mixed for the upcoming week. The markets are gearing for a really big directional move likely post the FED next week. Quantitative tightening by the FED is yet to be priced in fully. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Indian market volatility is still well below US market volatility as the nifty is close to resistance while the US market has hit resistance and turned down. The critical levels to watch are 2680 (up) and 2660 (down) on the S & P and 10750 (up) and 10600 (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.


Wednesday 25 April 2018

Bond Yields and Asset Allocation

While the current focus is on US 10 year bond yields pushing through 3% what is more important is the implication of surging bond yields for asset allocation decisions. First a look at a chart comparing 10 year bond yields to the earnings yield on the S and P 500. Thanks to the relentless QE's from the Fed the earnings yield is still well above the 10 year bond yield though the differential has narrowed considerably of late:

Earnings Yield Vs Bond Yield
data source: multpl.com, St. Louis Fed

Next a look at a chart comparing 2 year bond yields to the dividend yield on the S and P 500. After a very long period of time 2 year bond yields have now eclipsed the dividend yield on the S and P 500. Thus risk free assets are going to look increasingly attractive when compared to risky assets like stocks if yields surge further:

Dividend Yield Vs Bond Yield
data source: multpl.com, St. Louis Fed

Sunday 22 April 2018

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 23

Indicator
Weekly Level / Change
Implication for
S & P 500
Implication for Nifty*
S & P 500
2670, 0.52%
Bullish
Bullish
Nifty
10564, 0.80%
Neutral **
Bullish
China Shanghai Index
3072, -2.77%
Bearish
Bearish
Gold
1338, -0.71%
Bearish
Bearish
WTIC Crude
68.40, 1.50%
Bullish
Bullish
Copper
3.13, 2.08%
Bullish
Bullish
Baltic Dry Index
1201, 20.95%
Bullish
Bullish
Euro
1.2304, -0.32%
Neutral
Neutral
Dollar/Yen
107.60, 0.23%
Neutral
Neutral
Dow Transports
10579, 2.02%
Bullish
Bullish
High Yield (ETF)
35.99, -0.47%
Neutral
Neutral
US 10 year Bond Yield
2.95%, 4.31%
Bearish
Bearish
Nyse Summation Index
262, 132.95%
Bullish
Neutral
US Vix
16.88, -3.04%
Bullish
Bullish
Skew
133
Neutral
Neutral
20 DMA, S and P 500
2645, Above
Bullish
Neutral
50 DMA, S and P 500
2687, Below
Bearish
Neutral
200 DMA, S and P 500
2606, Above
Bullish
Neutral
20 DMA, Nifty
10332, Above
Neutral
Bullish
50 DMA, Nifty
10364, Above
Neutral
Bullish
200 DMA, Nifty
10242, Above
Neutral
Bullish
India Vix
12.94, -8.50%
Neutral
Bullish
Dollar/Rupee
66.19, 1.52%
Neutral
Bearish


Overall


S & P 500


Nifty

Bullish Indications
9
11
Bearish Indications
4
4
Outlook
Bullish
Bullish
Observation
The S and P 500 and the Nifty rallied last week. Indicators are bullish.
The markets have made important tops. Time to watch those stops.
On the Horizon
Australia – CPI, Japan BoJ rate decision, GDP, Euro Zone – German PMI, German IFO business climate index, German employment data, ECB rate decision, UK- GDP, Retail sales, U.S – Home sales, Consumer confidence, Oil inventories, Durable goods, GDP, Canada – Poloz speech, Russia – Rate decision   
*Nifty
India’s Benchmark Stock Market Index
Raw Data
Courtesy Google finance, Stock charts, investing.com
**Neutral
Changes less than 0.5% are considered neutral


stock market signals april 23

Chart courtesy David Rosenberg 


The S and P 500 and the Nifty rallied last week. Indicators are bullish for the upcoming week. Quantitative tightening by the FED is yet to be priced in fully. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Indian market volatility is still well below US market volatility as the nifty is close to resistance while the US market has hit resistance and turned down. The critical levels to watch are 2680 (up) and 2660 (down) on the S & P and 10650 (up) and 10500 (down) on the NiftyA significant breach of the above levels could trigger the next big move in the above markets. A combination of higher bond yields and high valuations could pose major challenges going forward.  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.