About

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.

Sunday, 2 October 2016

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning October 3

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2168, 0.17%	Neutral	Neutral
Nifty	8611, -2.50%	Neutral**	Bearish
China Shanghai Index	3005, -0.96%	Bearish	Bearish
Gold	1317, -1.83%	Bearish	Bearish
WTIC Crude	48.24, 8.45%	Bullish	Bullish
Copper	2.21, 0.43%	Neutral	Neutral
Baltic Dry Index	875, -7.01%	Bearish	Bearish
Euro	1.124, 0.14%	Neutral	Neutral
Dollar/Yen	101.38, 0.39%	Neutral	Neutral
Dow Transports	8079, 1.79%	Bullish	Bullish
High Yield (ETF)	36.72, 0.58%	Bullish	Bullish
US 10 year Bond Yield	1.61%, -0.43%	Neutral	Neutral
Nyse Summation Index	559, -2.11%	Bearish	Neutral
US Vix	13.29, 8.14%	Bearish	Bearish
20 DMA, S and P 500	2157, Above	Bullish	Neutral
50 DMA, S and P 500	2168, At	Neutral	Neutral
200 DMA, S and P 500	2064, Above	Bullish	Neutral
20 DMA, Nifty	8783, Below	Neutral	Bearish
50 DMA, Nifty	8690, Below	Neutral	Bearish
200 DMA, Nifty	7996, Above	Neutral	Bullish
India Vix	17.18, 29.68%	Neutral	Bearish
Dollar/Rupee	66.56, -0.21%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	5	4
Bearish Indications	5	8
Outlook	Neutral	Bearish
Observation	The S and P 500 was unchanged and the Nifty fell hard last week. Indicators are tilting bearish. Markets are challenging resistance again. Time to tighten those stops.
On the Horizon	Australia - Rate decision, India – RBI rate decision, Canada - Employment data, U.S – ISM data, Employment data

*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, dailyfx.com
**Neutral	Changes less than 0.5% are considered neutral

The S and P 500 was unchanged and the Nifty sold off hard last week. Signals are switching to the bearish side for the upcoming week. Market momentum and breadth have been showing divergences for months now and sentiment indicators are still highly complacent and a big breakdown will likely start soon. It is interesting to see all risky assets suddenly moving together much like in 2008. This is setting us up for some serious downside ahead unless recent resistance gets taken out soon. The critical levels to watch are 2180 (up) and 2160 (down) on the S & P and 8700 (up) and 8550 (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.

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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.