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

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...

Friday 29 April 2022

Jaws GAP - India Vix vs US Vix

There is quite a bit of underperformance in Indian market volatility compared to US market volatility since the COVID-19 crash as indicated by the jaws gap below. This should resolve soon with an upcoming spike in Indian market volatility and a significant fall in the Nifty Index.


 

Monday 25 April 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 25

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

4272, -2.75%

Bearish

Bearish

Nifty

17172, -1.74%

Neutral **

Bearish

China Shanghai Index

3087, - 3.87%

Bearish

Bearish

Gold

1933, -2.15%

Bearish

Bearish

WTIC Crude

101.75, -4.86%

Bearish

Bearish

Copper

4.58, - 2.92%

Bearish

Bearish

Baltic Dry Index

2370, 7.96%

Bullish

Bullish

Euro

1.0794, - 0.11%

Neutral

Neutral

Dollar/Yen

128.57, 1.76%

Bullish

Bullish

Dow Transports

15067, 1.50%

Bullish

Bullish

Corporate Bonds (ETF)

113.42, - 1.70%

Bearish

Bearish

High Yield Bonds (ETF)

98.79, - 1.13%

Bearish

Bearish

US 10-year Bond Yield

2.91%, 2.05%

Bearish

Bearish

NYSE Summation Index

-253, -37%

Bearish

Neutral

US Vix

28.21, 24.27%

Bearish

Bearish

Skew

136

Neutral

Neutral

20 DMA, S & P 500

4482, Below

Bearish

Neutral

50 DMA, S & P 500

4407, Below

Bearish

Neutral

200 DMA, S & P 500

4497, Below

Bearish

Neutral

20 DMA, Nifty

17466, Below

Neutral

Bearish

50 DMA, Nifty

17129, Above

Neutral

Bullish

200 DMA, Nifty

17148, Below

Neutral

Bearish

S & P 500 P/E

21.59

Bearish

Neutral

Nifty P/E

22.38

Neutral

Bearish

India Vix

18.35, 3.19%

Neutral

Bearish

Dollar/Rupee

76.46, 0.21%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

3

4

Bearish Indications

14

14

Outlook

Bearish

Bearish

Observation

The S and P and the Nifty fell last week. Indicators are bearish for the week.

The markets are correcting. Watch those stops.

On the Horizon

Japan – BOJ rate decision, Eurozone CPI, German GDP, US – 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

 


The S and P and the Nifty fell last week. Indicators are bearish for the week. Deflation is in the air despite the recent inflationary spike and the Chinese Yuan is telegraphing just that. Feels like a 2000-style recession trade has begun, with the increased possibility of a waterfall decline in risk assets soon. The recent rebound has likely run into resistance. (My views don’t matter, kindly pay attention to the levels). The S&P 500 closed below the 200 DMA recently, after spending a very long time above it. Monthly MACD’s on most global markets have gone negative after a long time. This spells trouble ahead and opens up a significant downside risk ahead. We could get a big sell-off in the markets this week.

We got a bounce that reached the 200 DMA without capitulation. This suggests the lows may not be in. Markets have been making new highs amid loads of divergences and risky assets are breaking to the downside. Earnings revisions have been average, but any significant upward revisions appear unlikely. Typical late-cycle FED put stuff has led to a taper tantrum following the recent taper announcement from the FED and a likely topTail risk has skyrocketed recently. The market is about to begin an epic correction. Deflationary busts often begin after inflationary scares (the market is calling the Fed’s bluff) and long bonds are telegraphing just that. 

The transports led the most recent rebound and are starting to lead the next decline, The Dollar, tail risk, market breadth, and bond yields, are continuing to flash major warning signs. The epic correction signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up, suggesting a major top may be in. The moment of reckoning is very near.  Technicals are tracking fundamentals and have recently turned bearish. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 4000 area is emerging on the S and P, and 15000 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.

The trend is about to change from bullish to bearish and the markets are about to get a reality check and get smashed by a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros.

Tail risk has been very high of late, as yield curves are about to invert yet again reflecting a major upcoming recession. The critical levels to watch for the week are 4285 (up) and 4260 (down) on the S & P 500 and 17250 (up) and 17100 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets.  High beta / P/E is about to get torched yet again. Gold is increasingly looking like the asset class to own in the upcoming decade. You can check out last week’s report for a comparison. Love your thoughts and feedback.

 

 

Monday 18 April 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 18

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

4393, -2.13%

Bearish

Bearish

Nifty

17476, -1.74%

Neutral **

Bearish

China Shanghai Index

3211, - 1.25%

Bearish

Bearish

Gold

1973, 1.38%

Bullish

Bullish

WTIC Crude

106.51, 8.40%

Bullish

Bullish

Copper

4.72, - 0.10%

Neutral

Neutral

Baltic Dry Index

2137, 3.99%

Bullish

Bullish

Euro

1.0809, - 0.62%

Bearish

Bearish

Dollar/Yen

126.36, 1.64%

Bullish

Bullish

Dow Transports

14844, 2.58%

Bullish

Bullish

Corporate Bonds (ETF)

115.38, - 1.55%

Bearish

Bearish

High Yield Bonds (ETF)

99.92, - 0.06%

Neutral

Neutral

US 10-year Bond Yield

2.83%, 3.87%

Bearish

Bearish

NYSE Summation Index

-185, -66%

Bearish

Neutral

US Vix

22.70, 7.28%

Bearish

Bearish

Skew

134

Neutral

Neutral

20 DMA, S & P 500

4503, Below

Bearish

Neutral

50 DMA, S & P 500

4418, Below

Bearish

Neutral

200 DMA, S & P 500

4495, Below

Bearish

Neutral

20 DMA, Nifty

17471, Above

Neutral

Bullish

50 DMA, Nifty

17165, Above

Neutral

Bullish

200 DMA, Nifty

17148, Above

Neutral

Bullish

S & P 500 P/E

22.20

Bearish

Neutral

Nifty P/E

22.92

Neutral

Bearish

India Vix

17.79, 0.55%

Neutral

Bearish

Dollar/Rupee

76.33, 0.52%

Neutral

Bearish

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

5

8

Bearish Indications

11

10

Outlook

Bearish

Bearish

Observation

The S and P and the Nifty fell last week. Indicators are bearish for the week.

The markets are correcting. Watch those stops.

On the Horizon

China – GDP, PBOC rate decision, Eurozone - CPI

*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 fell last week. Indicators are bearish for the week. Deflation is in the air despite the recent inflationary spike. Feels like a 2000 style recession trade has begun. The recent rebound has likely run into resistance. (My views don’t matter, kindly pay attention to the levels). The S&P 500 closed below the 200 DMA recently, after spending a very long time above it. Monthly MACD’s on most global markets have gone negative after a long time. This spells trouble ahead and opens up a significant downside risk ahead. We could continue to see a big sell-off in the markets this week, with some significant downside in the weeks to come.

We got a bounce that reached the 200 DMA without capitulation. This suggests the lows may not be in. Markets have been making new highs amid loads of divergences and risky assets are breaking to the downside. Earnings revisions have been average, but any significant upward revisions appear unlikely. Typical late-cycle FED put stuff has led to a taper tantrum following the recent taper announcement from the FED and a likely topTail risk has skyrocketed recently. The market is about to begin an epic correction. Deflationary busts often begin after inflationary scares (the market is calling the Fed’s bluff) and long bonds are telegraphing just that. 

The transports led the most recent rebound and are starting to lead the next decline, The Dollar, tail risk, market breadth, and bond yields, are continuing to flash major warning signs. The epic correction signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up, suggesting a major top may be in. The moment of reckoning is very near.  Technicals are tracking fundamentals and have recently turned bearish. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 4000 area is emerging on the S and P, and 15000 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.

The trend is about to change from bullish to bearish and the markets are about to get a reality check and get smashed by a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros.

Tail risk has been very high of late, as yield curves are about to invert yet again reflecting a major upcoming recession. The critical levels to watch for the week are 4405 (up) and 4380 (down) on the S & P 500 and 17550 (up) and 17400 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets.  High beta / P/E is about to get torched yet again. Gold is increasingly looking like the asset class to own in the upcoming decade. 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.