Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning August 24

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3397, 0.72%	Bullish	Bullish
Nifty	11372, 1.73%	Neutral **	Bullish
China Shanghai Index	3381, 0.61%	Bullish	Bullish
Gold	1948, -0.11%	Neutral	Neutral
WTIC Crude	42.30, 0.69%	Bullish	Bullish
Copper	2.93, 2.33%	Bullish	Bullish
Baltic Dry Index	1518, -4.83%	Bearish	Bearish
Euro	1.1796, -0.38%	Neutral	Neutral
Dollar/Yen	105.82, -0.73%	Bearish	Bearish
Dow Transports	10941, -0.17%	Neutral	Neutral
High Yield (Bond ETF)	105.13, 0.72%	Bullish	Bullish
US 10 year Bond Yield	0.64%, -10.75%	Bullish	Bullish
Nyse Summation Index	803, -12.85%	Neutral	Bearish
US Vix	22.54, 2.22%	Bearish	Bearish
Skew	147	Bearish	Bearish
20 DMA, S and P 500	3331, Above	Bullish	Neutral
50 DMA, S and P 500	3221, Above	Bullish	Neutral
200 DMA, S and P 500	3074, Above	Bullish	Neutral
20 DMA, Nifty	11221, Above	Neutral	Bullish
50 DMA, Nifty	10832, Above	Neutral	Bullish
200 DMA, Nifty	10831, Above	Neutral	Bullish
S & P 500 P/E	29.20	Bearish	Neutral
Nifty P/E	32.08	Neutral	Bearish
India Vix	19.94, -8.01%	Neutral	Bullish
Dollar/Rupee	74.92, 0.06%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	9	11
Bearish Indications	5	6
Outlook	Bullish	Bullish
Observation	The S and P and the Nifty were up last week. Indicators are bullish for the week. The markets have begun a great depression style collapse. Watch those stops.
On the Horizon	Euro Zone – German GDP, US – GDP
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Stock charts, investing.com, multpl.com, NSE
**Neutral	Changes less than 0.5% are considered neutral

 

The S and P 500 and the Nifty rallied last week. Indicators are bullish for the coming week. The recent rally to the prior highs is on borrowed time as we experience one of the worst earnings decline period in stock market history with extremely high valuations amid a lot of bearish divergences. We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 50% in our most recent rally of the lows in a similar 6 month period. After extreme euphoria for the indices a highly probable selloff to the 2700 area is emerging on the S and P, and 9000 should arrive on the Nifty in short order. The FED is repeating the Japan experiment and the lost 3 decades in Japan (1989-2019) is set to repeat across the globe. SPX 1500 and lower by year end and we stay there till 2050, scary? The markets are very close to an epic melt down and the SPX is headed way lower. The markets are overvalued, overbought and out of touch with economic realities. Long term, the epic meltdown is set to continue resulting in a 5 year plus bear market with lot lower levels maybe as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century and we have made a major top in global equity markets. The market is looking like the short of a life time with non-conformations from the transports, other global indices and commodities. High valuations continue. The breakdown in Crude and the Euro is a precursor to yet another massive drop in the S and P 500. The recent global virus epidemic (black swan) is likely to dent global GDP significantly and usher in a depression much faster than most think. The trend has changed from bullish to bearish and the markets are getting smashed by a strong dollar. Looking for significant under performance in the Nifty going forward on rapidly deteriorating macros. A 5 year deflationary wave has started in key asset classes like the Euro, stocks and commodities amidst a number of bearish divergences and over stretched valuations. We are entering a multi-year great depression. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Tail risk has been very high off late as the yield curve inverts into a recession. The critical levels to watch for the week are 3410 (up) and 3385 (down) on the S & P 500 and 11450 (up) and 11300 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. Love your thoughts and feedback.

Strangle Strategy for a Volatile Nifty Post the Fed Announcement Tonight

Volatility in the market has been surging of late with the India Vix eclipsing the 20 level of late. I expect this to continue post the fed. A strangle can help capture market volatility on either side.

Nifty Current Spot: 8280

8300 April Call - 35
8200 April put -19
Break even = 54
Break even points -8354, 8146
You make money on either side of 8146, 8354
You loose money if market stays between the above two levels.

Is the Rupee sending a warning signal to the stock market?

The last time there was significant Rupee weakness was back in August 2013 when the Nifty crashed closed to 20% led by bank stocks that crashed over 30%. Fast forward to today and significant Rupee weakness has started to re-emerge with the Rupee recently breaching the 64 level.

This has yet again caused bank stocks to underperform with the bank nifty down close to 10% from recent highs and further under performance is likely if the Rupee sells off further.

This would also prevent rates from coming down in the short term which is not good for the overall economy and the stock market.

Recently Indian stock stock market volatility has significantly exceeded US stock market volatility with the India vix crossing 19, yet another warning sign.

The stage appears to be set for significant equity underperformance in 2015.

Update on Nifty Strangle, Time to Book Profits

I had highlighted the Nifty 8400-8800 strangle at 95 in an earlier post.
http://rajveersmarketviews.blogspot.in/2015/04/option-trading-strategy-indian-market.html
As of Now
Nifty - Current Spot - 8823

Nifty 8400 Put - 15
Nifty 8800 Call - 135
Total -150
Profit -55%
Time to book profits!