Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning February 12

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5027, 1.37%	Bullish	Bullish
Nifty	21783, -0.33%	Neutral **	Neutral
China Shanghai Index	2866, 4.97%	Bullish	Bullish
Gold	2039, -0.73%	Bearish	Bearish
WTIC Crude	76.60, 5.98%	Bullish	Bullish
Copper	3.69, -3.55%	Bearish	Bearish
CRB Index	274, 2.47%	Bullish	Bullish
Baltic Dry Index	1545, 9.81%	Bullish	Bullish
Euro	1.0785, 0.01%	Neutral	Neutral
Dollar/Yen	149.29, 0. 62%	Bullish	Bullish
Dow Transports	16216, 2.63%	Bullish	Bullish
Corporate Bonds (ETF)	108.17, -1.32%	Bearish	Bearish
High Yield Bonds (ETF)	94.76, 0.33%	Neutral	Neutral
US 10-year Bond Yield	4.18%, 3.81%	Bearish	Bearish
NYSE Summation Index	575, -13%	Bearish	Neutral
US Vix	12.93, -6.64%	Bullish	Bullish
Skew	157	Bearish	Bearish
CNN Fear & Greed Index	Extreme Greed	Bearish	Bearish
20 DMA, S & P 500	4888, Above	Bullish	Neutral
50 DMA, S & P 500	4770, Above	Bullish	Neutral
200 DMA, S & P 500	4463, Above	Bullish	Neutral
20 DMA, Nifty	21702, Above	Neutral	Bullish
50 DMA, Nifty	21411, Above	Neutral	Bullish
200 DMA, Nifty	19748, Above	Neutral	Bullish
S & P 500 P/E	27.28	Bearish	Neutral
Nifty P/E	22.51	Neutral	Bearish
India Vix	15.45, 5.10%	Neutral	Bearish
Dollar/Rupee	83.01, 0.02%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	11	11
Bearish Indications	8	8
Outlook	Bullish	Bullish
Observation	The S&P 500 rose and the Nifty was little changed last week. Indicators are bullish for the week. Markets are topping. Watch those stops.
On the Horizon	US – CPI, PPI,  UK – CPI, GDP, Japan – 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&P 500 rose and the Nifty was unchanged last week. Indicators are bullish for the week. Markets are topping. We are transitioning from an inflationary regime to a deflationary collapse. The Nifty has started to correct and will likely underperform. We are way overbought short-term and are overdue a pull back here to as low as the 50 DMA, as we enter bearish seasonality.

The past week saw US equity markets rise. Most emerging markets rose, even as interest rates rose. Transports led up. The Baltic dry index rose. The dollar was unchanged. Commodities rose. Valuations continue to be quite expensive, market breadth fell, and the sentiment is now exuberant. Fear reduced 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 near its recent highs. We have bounced 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. 

The critical levels to watch for the week are 5040 (up) and 5015 (down) on the S&P 500 and 21850 (up) and 21700 (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.