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Ahead of the Curve provides 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 include capital markets, banking, investment analysis, and portfolio management, and he has over 20 years of experience in the above areas, covering the US and Indian markets. He has several publications in the above areas. He currently teaches business and management students at CHRIST University. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Sunday, 26 July 2020

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

Indicator
Weekly Level / Change
Implication for
S & P 500
Implication for Nifty*
S & P 500
3216, -0.28%
Neutral
Neutral
Nifty
11194, 2.68%
Neutral **
Bullish
China Shanghai Index
3197, -0.54%
Bearish
Bearish
Gold
1900, 4.96%
Bullish
Bullish
WTIC Crude
41.34, 1.37%
Bullish
Bullish
Copper
2.89, -0.45%
Neutral
Neutral
Baltic Dry Index
1388, -18.83%
Bearish
Bearish
Euro
1.1656, 2.00%
Bullish
Bullish
Dollar/Yen
106.14, -0.81%
Bearish
Bearish
Dow Transports
9730, -1.72%
Bearish
Bearish
High Yield (Bond ETF)
105.06, 1.32%
Bullish
Bullish
US 10 year Bond Yield
0.59%, -5.82%
Bullish
Bullish
Nyse Summation Index
728, 8.50%
Bullish
Neutral
US Vix
25.84, 0.62%
Bearish
Bearish
Skew
139
Neutral
Neutral
20 DMA, S and P 500
3175, Above
Bullish
Neutral
50 DMA, S and P 500
3104, Above
Bullish
Neutral
200 DMA, S and P 500
3041, Above
Bullish
Neutral
20 DMA, Nifty
10773, Above
Neutral
Bullish
50 DMA, Nifty
10177, Above
Neutral
Bullish
200 DMA, Nifty
10859, Above
Neutral
Bullish
S & P 500 P/E
27.64
Bearish
Neutral
Nifty P/E
29.35
Neutral
Bearish
India Vix
24.53, 1.56%
Neutral
Bearish
Dollar/Rupee
74.76, -0.18%
Neutral
Neutral


Overall


S & P 500


Nifty

Bullish Indications
9
8
Bearish Indications
6
7
Outlook
Bullish
Bullish
Observation
The S and P was unchanged and the Nifty rallied last week. Indicators are mildly bullish for the week.
The markets have begun a great depression style collapse. Watch those stops.
On the Horizon
US - FOMC rate decision, GDP, Eurozone - German employment data, German 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

stock market signals july 27


The S and P 500 was unchanged and the Nifty rallied last week. Indicators are marginally bullish for the coming week. The recent rally is on borrowed time as we head into one of the worst earnings decline period in stock market history with extremely high valuations. We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied 46% in our most recent rally of the lows, coincidence? After extreme euphoria for the indices a highly probable selloff to the 2700 area is emerging on the S and P, and 9000 should arrive on the Nifty in short order. 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 by year end and we stay there till 2050, scary? The markets are very close to an epic melt down 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 maybe as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century and we have made a major top in global equity markets. The market is looking like the short of a life time with non-conformations from the transports, other global indices and commodities. High valuations continue. The breakdown in Crude and the Euro is a precursor to yet another massive drop in the S and P 500. 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 has changed from bullish to bearish and the markets are getting smashed by a strong dollar. Looking for significant under performance 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 a number of bearish divergences and over stretched 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 off late as the yield curve inverts into a recession. The critical levels to watch for the week are 3225 (up) and 3200 (down) on the S & P 500 and 11250 (up) and 11100 (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. Here's the outlook from@TriggerTrades:

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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.