Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 30

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2670, -0.01%	Neutral	Neutral
Nifty	10692, 1.21%	Neutral **	Bullish
China Shanghai Index	3082, 0.35%	Neutral	Neutral
Gold	1323, -1.11%	Bearish	Bearish
WTIC Crude	68.10, -0.44%	Neutral	Neutral
Copper	3.05, -2.84%	Bearish	Bearish
Baltic Dry Index	1374, 14.49%	Bullish	Bullish
Euro	1.2136, -1.37%	Bearish	Bearish
Dollar/Yen	109.09, 1.38%	Bullish	Bullish
Dow Transports	10549, -0.28%	Neutral	Neutral
High Yield (ETF)	35.87, -0.33%	Neutral	Neutral
US 10 year Bond Yield	2.96%, 0.20%	Neutral	Neutral
Nyse Summation Index	205, -21.74%	Bearish	Neutral
US Vix	15.41, -8.71%	Bullish	Bullish
Skew	128	Neutral	Neutral
20 DMA, S and P 500	2654, Above	Bullish	Neutral
50 DMA, S and P 500	2688, Below	Bearish	Neutral
200 DMA, S and P 500	2611, Above	Bullish	Neutral
20 DMA, Nifty	10460, Above	Neutral	Bullish
50 DMA, Nifty	10375, Above	Neutral	Bullish
200 DMA, Nifty	10266, Above	Neutral	Bullish
India Vix	12.02, -7.11%	Neutral	Bullish
Dollar/Rupee	66.51, 0.47%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	5	8
Bearish Indications	5	3
Outlook	Neutral	Bullish
Observation	The S and P 500 was unchanged and the Nifty rallied last week. Indicators are mixed. The markets have made important tops. Time to watch those stops.
On the Horizon	Australia – RBA rate decision, China – PMI, UK- PMI’s, U.S – Home sales, ISM PMI’s, Oil inventories, FOMC rate decision, Employment data, Canada – Poloz speech, PMI
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, investing.com
**Neutral	Changes less than 0.5% are considered neutral

Chart courtesy David Rosenberg 

The S and P 500 was unchanged and the Nifty rallied last week. Indicators are mixed for the upcoming week. The markets are gearing for a really big directional move likely post the FED next week. Quantitative tightening by the FED is yet to be priced in fully. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Indian market volatility is still well below US market volatility as the nifty is close to resistance while the US market has hit resistance and turned down. The critical levels to watch are 2680 (up) and 2660 (down) on the S & P and 10750 (up) and 10600 (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.

Bond Yields and Asset Allocation

While the current focus is on US 10 year bond yields pushing through 3% what is more important is the implication of surging bond yields for asset allocation decisions. First a look at a chart comparing 10 year bond yields to the earnings yield on the S and P 500. Thanks to the relentless QE's from the Fed the earnings yield is still well above the 10 year bond yield though the differential has narrowed considerably of late:

data source: multpl.com, St. Louis Fed

Next a look at a chart comparing 2 year bond yields to the dividend yield on the S and P 500. After a very long period of time 2 year bond yields have now eclipsed the dividend yield on the S and P 500. Thus risk free assets are going to look increasingly attractive when compared to risky assets like stocks if yields surge further:

data source: multpl.com, St. Louis Fed

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 23

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2670, 0.52%	Bullish	Bullish
Nifty	10564, 0.80%	Neutral **	Bullish
China Shanghai Index	3072, -2.77%	Bearish	Bearish
Gold	1338, -0.71%	Bearish	Bearish
WTIC Crude	68.40, 1.50%	Bullish	Bullish
Copper	3.13, 2.08%	Bullish	Bullish
Baltic Dry Index	1201, 20.95%	Bullish	Bullish
Euro	1.2304, -0.32%	Neutral	Neutral
Dollar/Yen	107.60, 0.23%	Neutral	Neutral
Dow Transports	10579, 2.02%	Bullish	Bullish
High Yield (ETF)	35.99, -0.47%	Neutral	Neutral
US 10 year Bond Yield	2.95%, 4.31%	Bearish	Bearish
Nyse Summation Index	262, 132.95%	Bullish	Neutral
US Vix	16.88, -3.04%	Bullish	Bullish
Skew	133	Neutral	Neutral
20 DMA, S and P 500	2645, Above	Bullish	Neutral
50 DMA, S and P 500	2687, Below	Bearish	Neutral
200 DMA, S and P 500	2606, Above	Bullish	Neutral
20 DMA, Nifty	10332, Above	Neutral	Bullish
50 DMA, Nifty	10364, Above	Neutral	Bullish
200 DMA, Nifty	10242, Above	Neutral	Bullish
India Vix	12.94, -8.50%	Neutral	Bullish
Dollar/Rupee	66.19, 1.52%	Neutral	Bearish
Overall	S & P 500	Nifty
Bullish Indications	9	11
Bearish Indications	4	4
Outlook	Bullish	Bullish
Observation	The S and P 500 and the Nifty rallied last week. Indicators are bullish. The markets have made important tops. Time to watch those stops.
On the Horizon	Australia – CPI, Japan – BoJ rate decision, GDP, Euro Zone – German PMI, German IFO business climate index, German employment data, ECB rate decision, UK- GDP, Retail sales, U.S – Home sales, Consumer confidence, Oil inventories, Durable goods, GDP, Canada – Poloz speech, Russia – Rate decision
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, investing.com
**Neutral	Changes less than 0.5% are considered neutral

Chart courtesy David Rosenberg 

The S and P 500 and the Nifty rallied last week. Indicators are bullish for the upcoming week. Quantitative tightening by the FED is yet to be priced in fully. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Indian market volatility is still well below US market volatility as the nifty is close to resistance while the US market has hit resistance and turned down. The critical levels to watch are 2680 (up) and 2660 (down) on the S & P and 10650 (up) and 10500 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. A combination of higher bond yields and high valuations could pose major challenges going forward.  You can check out last week’s report for a comparison. Love your thoughts and feedback.