Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning September 21

 

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3320, -0.64%	Bearish	Bearish
Nifty	11505, 0.35%	Neutral **	Neutral
China Shanghai Index	3338, 2.38%	Bullish	Bullish
Gold	1958, 0.51%	Bullish	Bullish
WTIC Crude	41.32, 10.69%	Bullish	Bullish
Copper	3.11, 2.22%	Bullish	Bullish
Baltic Dry Index	1294, 2.13%	Bullish	Bullish
Euro	1.1840, -0.04%	Neutral	Neutral
Dollar/Yen	104.57, -1.49%	Bearish	Bearish
Dow Transports	11432, 1.32%	Bullish	Bullish
High Yield (Bond ETF)	104.85, -0.20%	Neutral	Neutral
US 10 year Bond Yield	0.70%, 3.92%	Bearish	Bearish
NYSE Summation Index	294, -14.00%	Bearish	Neutral
US Vix	25.83, -3.87%	Bullish	Bullish
Skew	132	Neutral	Neutral
20 DMA, S and P 500	3425, Below	Bearish	Neutral
50 DMA, S and P 500	3343, Below	Bearish	Neutral
200 DMA, S and P 500	3104, Above	Bullish	Neutral
20 DMA, Nifty	11470, Above	Neutral	Bullish
50 DMA, Nifty	11264, Above	Neutral	Bullish
200 DMA, Nifty	10781, Above	Neutral	Bullish
S & P 500 P/E	28.53	Bearish	Neutral
Nifty P/E	32.98	Neutral	Bearish
India Vix	20.05, -3.22%	Neutral	Bullish
Dollar/Rupee	73.54, 0.15%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	7	11
Bearish Indications	7	4
Outlook	Neutral	Bullish
Observation	The S and P fell and the Nifty was unchanged last week. Indicators are mixed for the week. The markets have begun a great depression style collapse. Watch those stops.
On the Horizon	China – PBOC rate decision
*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 500 fell and the Nifty was unchanged week. Indicators are mixed for the coming week. The recent rally to the prior highs on the S and P 500 is on borrowed time as we experience one of the worst earnings decline periods in stock market history with extremely high valuations amid a lot of bearish divergences and a September / October crash is on the menu following the small dead cat bounce from the 50dma. We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 50% 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 short order. The FED is repeating the Japan experiment and the  3 lost decades in Japan (1989-2019) are 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 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 and we have made a major top in global equity markets. The market is looking like the short of a lifetime 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 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 the yield curve inverts into a recession. The critical levels to watch for the week are 3330 (up) and 3310 (down) on the S & P 500 and 11600 (up) and 11400 (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.