Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning May 19

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	5958, 5.27%	Bullish	Bullish
Nifty	25020, 4.21%	Neutral **	Bullish
China Shanghai Index	3368, 0.76%	Bullish	Bullish
Gold	3187, -4.69%	Bearish	Bearish
WTIC Crude	61.90, 1.44%	Bullish	Bullish
Copper	4.59, -1.28%	Bearish	Bearish
CRB Index	296, 0.32%	Neutral	Neutral
Baltic Dry Index	1388, 6.85%	Bullish	Bullish
Euro	1.1164, -0.75%	Bearish	Bearish
Dollar/Yen	145.63, 0.19%	Neutral	Neutral
Dow Transports	15159, 7.97%	Bullish	Neutral
Corporate Bonds (ETF)	107.10, 0.46%	Neutral	Neutral
High-Yield Bonds (ETF)	95.74, 1.26%	Bullish	Bullish
US 10-year Bond Yield	4.44%, 1.41%	Bearish	Bearish
NYSE Summation Index	631, 76%	Bullish	Neutral
US Vix	17.24, -21.28%	Bullish	Neutral
S&P 500 Skew	136	Neutral	Neutral
CNN Fear & Greed Index	Greed	Bearish	Neutral
Nifty MMI Index	Extreme Greed	Neutral	Bearish
20 DMA, S&P 500	5625, Above	Bullish	Neutral
50 DMA, S&P 500	5558, Above	Bullish	Neutral
200 DMA, S&P 500	5760, Above	Bullish	Neutral
20 DMA, Nifty	24395, Above	Neutral	Bullish
50 DMA, Nifty	23471, Above	Neutral	Bullish
200 DMA, Nifty	24059, Above	Neutral	Bullish
S&P 500 P/E	28.39	Bearish	Neutral
Nifty P/E	22.39	Neutral	Bearish
India Vix	16.55, -23.49%	Neutral	Bullish
Dollar/Rupee	85.50, 0.11%	Neutral	Neutral
Overall	S&P 500	Nifty
Bullish Indications	12	10
Bearish Indications	5	6
Outlook	Bullish	Bullish
Observation	The S&P and the Nifty rose last week. Indicators are bullish for the week. Markets are topping again. Watch those stops.
On the Horizon	UK – CPI, Eurozone – CPI, German GDP
*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 rose last week. Indicators are bullish for the week. Markets are topping, and the bottom of this leg will likely be revisited near 4800 soon. We are transitioning into a deflationary regime. The sentiment is greedy. Carry trade liquidation will resume, and the S&P will likely find resistance near prior highs. The macro-environment was rapidly deteriorating even before the tariff and the recent Moody's issue. The recent massive breakdown in transports is quite ominous. This, combined with oil's free fall, has profound recessionary implications. The Nifty has corrected significantly from recent highs and will likely end its outperformance soon.

The past week saw US equity markets rise. Most emerging markets rose even as interest rates rose. Transports rose quite a bit. The Baltic dry index rose. The dollar was up. Commodities were little changed. Valuations are expensive, market breadth rebounded, and the sentiment is greedy. Volatility (S&P 500) retraced lower.

A currency crisis should resume and push risky assets to new lows. Deflation is in the air, and bonds are telegraphing just that despite intermittent spikes in yields. 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. Following the recent steepening of the yield curve after the first inversion, this second inversion (currently steepening) 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 5970 (up) and 5945 (down) on the S&P 500 and 25100 (up) and 24900 (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 (currently correcting). 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.

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

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	5660, -0.47%	Neutral	Neutral
Nifty	24008, -1.39%	Neutral **	Bearish
China Shanghai Index	3342, 1.92%	Bullish	Bullish
Gold	3344, 3.10%	Bullish	Bullish
WTIC Crude	61.02, 4.68%	Bullish	Bullish
Copper	4.61, -0.87%	Bearish	Bearish
CRB Index	295, 1.66%	Bullish	Bullish
Baltic Dry Index	1299, -8.59%	Bearish	Bearish
Euro	1.1248, -0.42%	Neutral	Neutral
Dollar/Yen	145.36, 0.28%	Neutral	Neutral
Dow Transports	14040, -0.26%	Neutral	Neutral
Corporate Bonds (ETF)	106.61, -0.28%	Neutral	Neutral
High-Yield Bonds (ETF)	94.55, -0.02%	Neutral	Neutral
US 10-year Bond Yield	4.38%, 1.71%	Bearish	Bearish
NYSE Summation Index	359, 217%	Bullish	Neutral
US Vix	21.90, -3.44%	Bullish	Neutral
S&P 500 Skew	128	Neutral	Neutral
CNN Fear & Greed Index	Greed	Bearish	Neutral
Nifty MMI Index	Greed	Neutral	Bearish
20 DMA, S&P 500	5486, Above	Bullish	Neutral
50 DMA, S&P 500	5551, Above	Bullish	Neutral
200 DMA, S&P 500	5748, Below	Bearish	Neutral
20 DMA, Nifty	23909, Above	Neutral	Bullish
50 DMA, Nifty	23253, Above	Neutral	Bullish
200 DMA, Nifty	24052, Below	Neutral	Bearish
S&P 500 P/E	26.91	Bearish	Neutral
Nifty P/E	21.60	Neutral	Bearish
India Vix	21.90, 18.49%	Neutral	Bearish
Dollar/Rupee	85.41, 1.04%	Neutral	Bearish
Overall	S&P 500	Nifty
Bullish Indications	8	6
Bearish Indications	6	9
Outlook	Bullish	Bearish
Observation	The S&P and the Nifty fell last week. Indicators are mixed for the week. Markets are topping again. Watch those stops.
On the Horizon	US – CPI, PPI, UK – GDP, Eurozone – German CPI, Japan – GDP
*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 mixed for the week. Markets have topped, and the bottom of this leg will likely be revisited near 4800 soon. We are transitioning into a deflationary regime. The sentiment is greedy. Carry trade liquidation has resumed, and the S&P will likely find resistance near the 200 DMA at 5750. The macro-environment was rapidly deteriorating even before the tariff issue. The recent massive breakdown in transports is quite ominous. This, combined with oil's free fall, has profound recessionary implications. The Nifty has corrected significantly from recent highs and will likely end its outperformance soon. The 200 DMAs of most global indices have started declining after almost 4 years, and volatility indices are about to exhibit golden crosses in their weekly MAs.

The past week saw US equity markets fall. Most emerging markets were unchanged even as interest rates rose. Transports were unchanged. The Baltic dry index fell. The dollar was unchanged. Commodities fell. Valuations are expensive, market breadth rebounded, and the sentiment is greedy. Volatility (S&P 500) retraced lower.

A currency crisis should resume and push risky assets to new lows. Deflation is in the air, and bonds are telegraphing just that despite intermittent spikes in yields. 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. Following the recent steepening of the yield curve after the first inversion, this second inversion (currently steepening) 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 5675 (up) and 5645 (down) on the S&P 500 and 24100 (up) and 23900 (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 (currently going parabolic and near resistance). 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.