Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning March 29

 

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3975, 1.57%	Bullish	Bullish
Nifty	14507, -1.61%	Neutral **	Bearish
China Shanghai Index	3418, 0.40%	Neutral	Neutral
Gold	1731, -0.60%	Bearish	Bearish
WTIC Crude	60.73, -1.12%	Bearish	Bearish
Copper	4.08, -0.84%	Bearish	Bearish
Baltic Dry Index	2178, -4.52%	Bearish	Bearish
Euro	1.1794, -0.92%	Bearish	Bearish
Dollar/Yen	109.67, 0.73%	Neutral	Neutral
Dow Transports	14606, 2.99%	Neutral	Neutral
High Yield (Bond ETF)	108.51, 0.88%	Bullish	Bullish
US 10 year Bond Yield	1.67%, -1.92%	Bullish	Bullish
NYSE Summation Index	513, -23.40%	Bearish	Neutral
US Vix	18.86, -9.98%	Bullish	Bullish
Skew	146	Bearish	Bearish
20 DMA, S and P 500	3902, Above	Bullish	Neutral
50 DMA, S and P 500	3874, Above	Bullish	Neutral
200 DMA, S and P 500	3535, Above	Bullish	Neutral
20 DMA, Nifty	14827, Below	Neutral	Bearish
50 DMA, Nifty	14765, Below	Neutral	Bearish
200 DMA, Nifty	12609, Above	Neutral	Bullish
S & P 500 P/E	40.47	Bearish	Neutral
Nifty P/E	39.51	Neutral	Bearish
India Vix	20.65, 3.31%	Neutral	Bearish
Dollar/Rupee	72.62, 0.30%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	7	5
Bearish Indications	8	11
Outlook	Bearish	Bearish
Observation	The S and P rallied and the Nifty fell last week. Indicators are bearish for the week. The markets are about to begin a great depression style collapse. Watch those stops.
On the Horizon	UK - GDP, 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 rallied and the Nifty fell last week. Indicators are bearish for the week. Deflationary busts often begin with inflation scares (the market is calling the Fed’s bluff) and gold is telegraphing just that. Corporate bonds are flashing early warning signs. 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 3 lost decades in Japan (1989-2019) are 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) has dented global GDP significantly and will 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 are about to plunge yet again reflecting a major recession. The critical levels to watch for the week are 3990 (up) and 3960 (down) on the S & P 500 and 14600 (up) and 14450 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. China, Gold, Bonds, and the Nasdaq are on Ichimoku sell signals while the S & P 500 and Nifty are on Ichimoku buy signals so some eventual catch-up to the downside may be left in these indices. Looking for weakness into April. You can check out last week’s report for a comparison. Love your thoughts and feedback.