Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning March 31

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5581, -1.53%	Bearish	Bearish
Nifty	23519, 0.72%	Neutral **	Bullish
China Shanghai Index	3351, -0.40%	Neutral	Neutral
Gold	3127, 1.58%	Bullish	Bullish
WTIC Crude	69.36, 1.58%	Bullish	Bullish
Copper	5.15, 0.76%	Bullish	Bullish
CRB Index	307, 0.36%	Neutral	Neutral
Baltic Dry Index	1602, -2.50%	Bearish	Bearish
Euro	1.0827, 0.12%	Neutral	Neutral
Dollar/Yen	149.81, 0.33%	Neutral	Neutral
Dow Transports	14593, -0.11%	Neutral	Neutral
Corporate Bonds (ETF)	108.48, 0.75%	Neutral	Neutral
High Yield Bonds (ETF)	95.21, -0.57%	Bearish	Bearish
US 10-year Bond Yield	4.25%, 0.05%	Neutral	Neutral
NYSE Summation Index	-195, 4%	Bullish	Neutral
US Vix	21.65, 12.29%	Bearish	Neutral
S & P 500 Skew	139	Neutral	Neutral
CNN Fear & Greed Index	Extreme Fear	Bullish	Neutral
Nifty MMI Index	Extreme Greed	Neutral	Bearish
20 DMA, S & P 500	5688, Below	Bearish	Neutral
50 DMA, S & P 500	5900, Below	Bearish	Neutral
200 DMA, S & P 500	5759, Below	Bearish	Neutral
20 DMA, Nifty	22815, Above	Neutral	Bullish
50 DMA, Nifty	22999, Above	Neutral	Bullish
200 DMA, Nifty	24076, Below	Neutral	Bearish
S & P 500 P/E	27.80	Bearish	Neutral
Nifty P/E	21.37	Neutral	Bearish
India Vix	12.72, 1.13%	Neutral	Bearish
Dollar/Rupee	85.53, -0.53%	Neutral	Bullish
Overall	S & P 500	Nifty
Bullish Indications	5	7
Bearish Indications	8	7
Outlook	Bearish	Neutral
Observation	The S&P fell, and the Nifty rose last week. Indicators are bearish for the week. Markets have topped. Watch those stops.
On the Horizon	US – Employment data, Eurozone – 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 fell, and the Nifty rose last week. Indicators are bearish for the week. Markets have topped. We are transitioning from an inflationary regime to a deflationary one. The sentiment is extremely fearful. Carry trade liquidation may resume quickly, as the S & P is below the 200 DMA near 5760, which will likely act as resistance to this oversold bounce. The macro environment is rapidly deteriorating. The massive breakdown in transports is quite ominous. 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 were little changed. Transports were unchanged. The Baltic dry fell. The dollar was unchanged. Commodities were also unchanged. Valuations are expensive, market breadth rebounded, and the sentiment is fearful. Fear (S&P 500) is 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 falters. 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 5595 (up) and 5570 (down) on the S&P 500 and 23600 (up) and 23450 (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 is a sell on every rise. Gold increasingly looks like the asset class to own over the next decade (short-term resistance at 3200). 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.