Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning December 04

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	4595, 0.77%	Bullish	Bullish
Nifty	20268, 2.39%	Neutral **	Bullish
China Shanghai Index	3032, -0.31%	Neutral	Neutral
Gold	2092, 4.47%	Bullish	Bullish
WTIC Crude	74.38, -1.54%	Bearish	Bearish
Copper	3.92, 2.59%	Bullish	Bullish
CRB Index	271, -0.45%	Neutral	Neutral
Baltic Dry Index	3192, 51.86%	Bullish	Bullish
Euro	1.0883, -0.51%	Bearish	Bearish
Dollar/Yen	146.80, -1.77%	Bearish	Bearish
Dow Transports	15464, 2.45%	Bullish	Bullish
Corporate Bonds (ETF)	107.15, 2.32%	Bullish	Bullish
High Yield Bonds (ETF)	92.93, 1.15%	Bullish	Bullish
US 10-year Bond Yield	4.21%, -5.89%	Bullish	Bullish
NYSE Summation Index	331, 483%	Bullish	Neutral
US Vix	12.63, 1.36%	Bearish	Bearish
Skew	145	Bearish	Bearish
CNN Fear & Greed Index	Greed	Bearish	Bearish
20 DMA, S & P 500	4485, Above	Bullish	Neutral
50 DMA, S & P 500	4360, Above	Bullish	Neutral
200 DMA, S & P 500	4286, Above	Bullish	Neutral
20 DMA, Nifty	19667, Above	Neutral	Bullish
50 DMA, Nifty	19593, Above	Neutral	Bullish
200 DMA, Nifty	18808, Above	Neutral	Bullish
S & P 500 P/E	25.38	Bearish	Neutral
Nifty P/E	21.66	Neutral	Bearish
India Vix	12.38, 9.29%	Neutral	Bearish
Dollar/Rupee	83.18, -0.19%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	12	12
Bearish Indications	7	8
Outlook	Bullish	Bullish
Observation	The S&P 500 and the Nifty rallied last week. Indicators are bullish for the week. Markets are at resistance. Watch those stops.
On the Horizon	Eurozone – German CPI, US – Employment data, Japan - GDP, India - RBI 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 rallied last week. Indicators are bullish for the week. Markets are at resistance, as we enter bullish seasonality. We are transitioning from an inflationary regime to a deflationary collapse. The Nifty has caught up to the upside. We are way overbought short-term and will likely pull back here.

The past week saw US equity markets rise. Most emerging markets rose, as interest rates fell. Transports led the move up. The Baltic dry index rose significantly. The dollar rose. Commodities except oil were mostly up. Valuations continue to be quite expensive, market breadth improved, and the sentiment is now exuberant. Fear abated this week, as a possible reality check from a FED Pivot looms.

After this rally, 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 4605 (up) and 4580 (down) on the S&P 500 and 20350 (up) and 20200 (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 burst) You can check out last week’s report for a comparison. Love your thoughts and feedback.