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Ahead of the Curve provides analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity, and FOREX markets are discussed. Rajveer Rawlin is a PhD and received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher, having followed capital markets in the US and India since 1993. His research interests include capital markets, banking, investment analysis, and portfolio management, and he has over 20 years of experience in the above areas, covering the US and Indian markets. He has several publications in the above areas. He currently teaches business and management students at CHRIST University. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Sunday, 17 January 2016

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning January 18

Indicator
Weekly Level / Change / Significance
Implication for
S & P 500
Implication for Nifty*
S & P 500
1880, -2.17%
Bearish
Bearish
Nifty
7438, -2.15%
Neutral**
Bearish
China Shanghai Index
2901, -8.96%
Bearish
Bearish
Gold
1089, -1.40%
Bearish
Bearish
WTIC Crude
30.68, -6.69%
Bearish
Bearish
Copper
1.95, -3.30%
Bearish
Bearish
Baltic Dry Index
373, -13.05%
Bearish
Bearish
Euro
1.086, -0.57%
Bearish
Bearish
Dollar/Yen
117.04, -0.34%
Neutral
Neutral
Dow Transports
6689, -3.70%
Bearish
Bearish
High Yield (ETF)
32.73, -2.24%
Bearish
Bearish
US 10 year Bond Yield
2.03%, -4.55%
Bullish
Bullish
Nyse Summation Index
-535.44, -200.42%
Bearish
Neutral
US Vix
27.02, 0.04%
Neutral
Neutral
20 DMA, S and P 500
1996, Below
Bearish
Neutral
50 DMA, S and P 500
2041, Below
Bearish
Neutral
200 DMA, S and P 500
2054, Below
Bearish
Neutral
20 DMA, Nifty
7743, Below
Neutral
Bearish
50 DMA, Nifty
7789, Below
Neutral
Bearish
200 DMA, Nifty
8142, Below
Neutral
Bearish
India Vix
19.42, 9.09%
Neutral
Bearish
Dollar/Rupee
67.76, 1.30%
Bearish
Bearish


Overall


S & P 500


Nifty

Bullish Indications

1

1
Bearish Indications
15
17
Outlook
Bearish
Bearish
Observation
The Sand P 500 and the Nifty were down hard last week. Indicators are bearish but the market is becoming oversold. Looking for downside to continue after an oversold bounce.
On the Horizon
Canada – Rate decision, CPI, New Zealand – CPI, Euro zone – German ZEW survey, Rate decision U.K – CPI, U.S – CPI, China – GDP.
*Nifty
India’s Benchmark Stock Market Index
Raw Data
Courtesy Google finance, Stock charts, FXCM
**Neutral
Changes less than 0.5% are considered neutral

The US market and Nifty fell hard last week. Signals are bearish for the upcoming week. The markets are in crash mode and are likely to continue major breakdowns in 2016 after an oversold bounce. The critical levels to watch are 1900 (up) and 1860 (down) on the S & P and 7500 (up) and 7400 (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. You can also check out snapshots of the 
S and P 500 and Nifty Indices. Love your thoughts and feedback.
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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.