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

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	4117, -2.53%	Bearish	Bearish
Nifty	19047, -2.53%	Neutral **	Bearish
China Shanghai Index	3018, 1.16%	Bullish	Bullish
Gold	2016, 1.10%	Bullish	Bullish
WTIC Crude	85.16, -4.05%	Bearish	Bearish
Copper	3.64, 2.25%	Bullish	Bullish
CRB Index	285, -0.32%	Neutral	Neutral
Baltic Dry Index	1563, -23.61%	Bearish	Bearish
Euro	1.0566, -0.25%	Neutral	Neutral
Dollar/Yen	149.65, -0.13%	Neutral	Neutral
Dow Transports	13556, -6.19%	Bearish	Bearish
Corporate Bonds (ETF)	99.61, 0.95%	Bullish	Bullish
High Yield Bonds (ETF)	88.61, 0.58%	Bullish	Bullish
US 10-year Bond Yield	4.85%, -1.40%	Bullish	Bullish
NYSE Summation Index	-817, -33%	Bearish	Neutral
US Vix	21.27, -2.03%	Bullish	Bullish
Skew	133	Neutral	Neutral
CNN Fear & Greed Index	Extreme Fear	Bullish	Bullish
20 DMA, S & P 500	4278, Below	Bearish	Neutral
50 DMA, S & P 500	4362, Below	Bearish	Neutral
200 DMA, S & P 500	4240, Below	Bearish	Neutral
20 DMA, Nifty	19529, Below	Neutral	Bearish
50 DMA, Nifty	19588, Below	Neutral	Bearish
200 DMA, Nifty	18613, Above	Neutral	Bullish
S & P 500 P/E	23.50	Bearish	Neutral
Nifty P/E	20.84	Neutral	Bearish
India Vix	10.91, 0.81%	Neutral	Bearish
Dollar/Rupee	83.41, 0.32%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	8	9
Bearish Indications	9	9
Outlook	Bearish	Neutral
Observation	The S&P 500 and the Nifty fell last week. Indicators are mixed for the week. Markets are heading for a bottom soon. Watch those stops.
On the Horizon	Eurozone – German GDP, German CPI, CPI, US – FOMC rate decision, Employment data, UK – BOE 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&P 500 and the Nifty fell last week. Indicators are mixed for the week. Markets are heading for a bottom soon, as we enter bullish seasonality which is being impacted by rising rates. We are transitioning from an inflationary regime to a deflationary collapse. The Nifty is correcting from its recent highs.

The past week saw US equity markets fall. Most emerging markets fell, even as interest rates fell. Transports led down big. The Baltic dry index fell. The dollar was unchanged. Commodities were unchanged. Valuations continue to be quite expensive, market breadth fell, and the sentiment is now bearish. Fear abated this week, as a possible reality check from a FED Pivot looms.

The recent currency crisis should resume and push risky assets to new lows across the board. Deflation is in the air despite the recent inflationary spike and bonds are telegraphing just that. Feels like a 2008-style recession trade has begun, with a potential for a decline in risk assets across the board. The current market is tracking closely the 2000 moves down in the S&P 500, implying a panic low right ahead in the upcoming months (My views do not matter, kindly pay attention to the levels). A dollar rebound from major support is a likely catalyst.

The S&P 500 is encountering resistance near its recent highs. We have got bounces from recent lows without capitulation. This suggests the lows may not be in and the regime has changed from buying the dip to selling the rip. We may get a final flush down soon. Risky assets should continue breaking to the downside across the board, as downward earnings revisions are underway.

The Fed has aggressively tightened into a recession. Deflationary busts often begin after major inflationary scares. The market has rebounded after correcting significantly, and more is left on the downside. The Dollar, commodities, and bond yields are continuing to flash major warning signs.

The epic correction signal occurred with retail, hedge funds, and speculators all in, in January 2022, suggesting a major top is in. The moment of reckoning is here. With extremely high valuations, a crash is on the menu. Low volatility suggests complacency and downside ahead.

Global yield curves have inverted significantly reflecting a major upcoming recession. The recent steepening of the yield curve, within an inverted context, with rates falling, is a precursor to the next recession, and the riskiest assets will underperform going forward under such conditions. Looking for significant underperformance in the Nifty going forward on challenging macros.

The critical levels to watch for the week are 4130 (up) and 4105 (down) on the S&P 500 and 19150 (up) and 18950 (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 will get torched yet again and will likely prove to be a sell on every rise. Gold is increasingly looking like the asset class to own over the next decade. (Gold exploded almost 8 times higher over the decade following the dot-com bust in 2000, just imagine what would happen when this AI bubble bursts? following the recent crypto bubble bust) You can check out last week’s report for a comparison. Love your thoughts and feedback.