Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning March 03

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	6955, -0.98%	Bearish	Bearish
Nifty	22125, -2.94%	Neutral **	Bearish
China Shanghai Index	3321, -1.72%	Bearish	Bearish
Gold	2862, -3.08%	Bearish	Bearish
WTIC Crude	69.76, -0.91%	Bearish	Bearish
Copper	4.57, -1.02%	Bearish	Bearish
CRB Index	302, -3.02%	Bearish	Bearish
Baltic Dry Index	1229, 25.28%	Bullish	Bullish
Euro	1.0375, -0.79%	Bearish	Bearish
Dollar/Yen	150.60, 0.88%	Bullish	Bullish
Dow Transports	15987, -0.30%	Neutral	Neutral
Corporate Bonds (ETF)	109.61, 1.26%	Bullish	Bullish
High Yield Bonds (ETF)	97.12, 0.51%	Bullish	Bullish
US 10-year Bond Yield	4.20%, -5.15%	Bullish	Bullish
NYSE Summation Index	142, -41%	Bearish	Neutral
US Vix	19.63, 7.80%	Bearish	Neutral
S & P 500 Skew	158	Bearish	Neutral
CNN Fear & Greed Index	Extreme Fear	Bullish	Neutral
Nifty MMI Index	Fear	Neutral	Bullish
20 DMA, S & P 500	6039, Below	Bearish	Neutral
50 DMA, S & P 500	5999, Below	Bearish	Neutral
200 DMA, S & P 500	5720, Above	Bullish	Neutral
20 DMA, Nifty	23062, Below	Neutral	Bearish
50 DMA, Nifty	23301, Below	Neutral	Bearish
200 DMA, Nifty	24054, Below	Neutral	Bearish
S & P 500 P/E	29.79	Bearish	Neutral
Nifty P/E	19.67	Neutral	Neutral
India Vix	13.91, -4.27%	Neutral	Bullish
Dollar/Rupee	87.47, 1.03%	Neutral	Bearish
Overall	S & P 500	Nifty
Bullish Indications	7	7
Bearish Indications	13	12
Outlook	Bearish	Bearish
Observation	The S&P and the Nifty were down last week. Indicators are bearish for the week. Markets are topping. Watch those stops.
On the Horizon	US – Employment data, Eurozone – ECB rate decision
*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 were down last week. Indicators are bearish for the week. Markets are topping. We are transitioning from an inflationary regime to a deflationary one. The sentiment is fearful, 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 5700. Markets have bounced from oversold levels, and rallies may terminate soon on the S & P near the 50 DMA. The Nifty has corrected significantly from recent highs and will likely underperform.

The past week saw US equity markets fall. Most emerging markets fell even as interest rates fell. Transports were unchanged. The Baltic dry index rose sharply. The dollar rose. Commodities fell. Valuations are expensive, market breadth has fallen, and the sentiment is fearful. Fear (S&P 500) was back in vogue.

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 inverted a second time after the recent steepening, reflecting the arrival of a significant economic slowdown. This inversion following the recent steepening of the yield curve, after the first inversion, 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 5965 (up) and 5940 (down) on the S&P 500 and 22200 (up) and 22000 (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 to gold as this AI bubble bursts. You can check out last week’s report for a comparison. I love your thoughts and feedback.