Monday, 28 October 2024

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning October 28

 

Asset Class

Weekly Level / Change

Implication for S & P 500

Implication for Nifty*

S & P 500

5808, -0.96%

Bearish

Bearish

Nifty

24181, -2.71%

Neutral **

Bearish

China Shanghai Index

3300, 1.17%

Bullish

Bullish

Gold

2755, 0.90%

Bullish

Bullish

WTIC Crude

71.35, 3.87%

Bullish

Bullish

Copper

4.37, -0.32%

Neutral

Neutral

CRB Index

285, 1.84%

Bullish

Bullish

Baltic Dry Index

1410, -10.53%

Bearish

Bearish

Euro

1.0796, -0.64%

Bearish

Bearish

Dollar/Yen

152.30, 1.86%

Bullish

Bullish

Dow Transports

16104, -1.70%

Bearish

Neutral

Corporate Bonds (ETF)

109.31, -1.30%

Bearish

Bearish

High Yield Bonds (ETF)

96.36, -0.75%

Bearish

Bearish

US 10-year Bond Yield

4.23%, 3.90%

Bearish

Bearish

NYSE Summation Index

635, -27%

Bearish

Neutral

US Vix

20.33, 12.76%

Bearish

Neutral

S & P 500 Skew

149

Bearish

Neutral

CNN Fear & Greed Index

Greed

Bearish

Neutral

Nifty MMI Index

Extreme Fear

Neutral

Bullish

20 DMA, S & P 500

5791, Above

Bullish

Neutral

50 DMA, S & P 500

5683, Above

Bullish

Neutral

200 DMA, S & P 500

5334, Above

Bullish

Neutral

20 DMA, Nifty

24992, Below

Neutral

Bearish

50 DMA, Nifty

25128, Below

Neutral

Bearish

200 DMA, Nifty

23372, Above

Neutral

Bullish

S & P 500 P/E

29.65

Bearish

Neutral

Nifty P/E

22.56

Neutral

Bearish

India Vix

14.63, 12.23%

Neutral

Bearish

Dollar/Rupee

84.10, 0.04%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

8

7

Bearish Indications

12

11

 

Outlook

Bearish

Bearish

Observation

 

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

Markets are correcting from resistance. Watch those stops.

On the Horizon

US – GDP, Employment data, Eurozone – German GDP, CPI

*Nifty

 

India’s Benchmark Stock Market Index

Raw Data

Data courtesy stockcharts.com, investing.com, multpl.com, nseindia.com, tickertape.in

**Neutral

Changes less than 0.5% are considered neutral

 


The S&P and the Nifty fell last week. Indicators are bearish for the week. Markets are correcting from prior highs. We are transitioning from an inflationary regime to a deflationary one. The sentiment is in greed mode, and risk-reward is poor at these levels. Carry trade liquidation may resume as we conclude a seasonally weak period. The Nifty is correcting from recent highs and will likely underperform after an oversold bounce.

The past week saw US equity markets fall. Most emerging markets fell as interest rates rose. Transports fell. The Baltic dry index fell. The dollar rose. Commodities rebounded. Valuations are expensive, market breadth fell, and the sentiment is bullish. Fear (S&P 500) abated even as the reality of the FED pivot kicked in.

After this rally, a currency crisis should resume and push risky assets to new lows. Despite the recent inflationary spike, deflation is in the air, and bonds are telegraphing just that. It 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 significant support is a likely catalyst.

The S&P 500 is correcting from all-time 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 as earnings growth peaks. The Fed has aggressively tightened into a recession. Deflationary busts often begin after major inflationary scares. After correcting significantly, the market has made new highs, and more is left on the downside. The Dollar, commodities, and bond yields are flashing major warning signs.

Global yield curves have steepened after inverting significantly, reflecting a major economic slowdownThe 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 5820 (up) and 5795 (down) on the S&P 500 and 24250 (up) and 24100 (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 again and likely be a sell on every rise. Gold increasingly looks like the asset class (though overextended short-term) to own over the next decade. (Gold exploded almost eight times higher over the decade following the dot-com bust in 2000. 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.

 

 

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