Monday, 27 January 2025

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning January 27

 

Asset Class

Weekly Level / Change

Implication for S & P 500

Implication for Nifty*

S & P 500

6101, 1.74%

Bullish

Bullish

Nifty

23092, -0.48%

Neutral **

Neutral

China Shanghai Index

3253, 0.33%

Neutral

Neutral

Gold

2807, 2.11%

Bullish

Bullish

WTIC Crude

74.66, -4.13%

Bearish

Bearish

Copper

4.32, -1.09%

Bearish

Bearish

CRB Index

310, -0.40%

Neutral

Neutral

Baltic Dry Index

778, -21.18%

Bearish

Bearish

Euro

1.0493, 2.16%

Bullish

Bullish

Dollar/Yen

155.98, -0.20%

Neutral

Neutral

Dow Transports

16606, 1.06%

Bullish

Neutral

Corporate Bonds (ETF)

107.12, 0.32%

Neutral

Neutral

High Yield Bonds (ETF)

96.81, 0.37%

Neutral

Neutral

US 10-year Bond Yield

4.62%, -0.13%

Neutral

Neutral

NYSE Summation Index

-33, 88%

Bullish

Neutral

US Vix

14.85, -7.01%

Bullish

Neutral

S & P 500 Skew

173

Bearish

Neutral

CNN Fear & Greed Index

Neutral

Neutral

Neutral

Nifty MMI Index

Extreme Fear

Neutral

Bullish

20 DMA, S & P 500

5960, Above

Bullish

Neutral

50 DMA, S & P 500

5981, Above

Bullish

Neutral

200 DMA, S & P 500

5608, Above

Bullish

Neutral

20 DMA, Nifty

23451, Below

Neutral

Bearish

50 DMA, Nifty

23853, Below

Neutral

Bearish

200 DMA, Nifty

23976, Below

Neutral

Bearish

S & P 500 P/E

30.50

Bearish

Neutral

Nifty P/E

21.09

Neutral

Bearish

India Vix

16.75, 6.33%

Neutral

Bearish

Dollar/Rupee

86.20, -0.43%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

9

4

Bearish Indications

5

8

 

Outlook

Bullish

Bearish

Observation

 

The S&P rose, and the Nifty fell last week. Indicators are mixed for the week.

Markets are topping. Watch those stops.

On the Horizon

US – GDP, FOMC rate decision, Eurozone – German GDP, ECB rate decision, India – Union budget 2025  

*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 rose, and the Nifty fell last week. Indicators are mixed for the week. Markets are topping. We are transitioning from an inflationary regime to a deflationary one. The sentiment is neutral, and risk-reward is poor at these levels as divergences develop. Carry trade liquidation may resume in short order, and the S & P is due for a trip to the 200 DMA near 5600. Markets have bounced from oversold levels, and rallies may terminate soon on the S & P. The Nifty has corrected significantly from recent highs and will likely underperform.

The past week saw US equity markets rise. Most emerging markets rose as interest rates were little changed. Transports rose. The Baltic dry index fell. The dollar fell. Commodities were unchanged. Valuations are expensive, market breadth has risen, and the sentiment is neutral. Fear (S&P 500) abated.

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 rally is a likely catalyst.

The S&P 500 is correcting from 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 as earnings growth peaks. The Fed has aggressively tightened into a recession. Deflationary busts often begin after major inflationary scares. The Dollar, commodities, and bond yields are flashing significant warning signs.

Global yield curves have steepened after inverting significantly, reflecting a significant 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 6115 (up) and 6090 (down) on the S&P 500 and 23200 (up) and 23000 (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 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. I love your thoughts and feedback.

 

 

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