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, 24 June 2018

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning June 25

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2755, -0.89%	Bearish	Bearish
Nifty	10822, 0.04%	Neutral **	Neutral
China Shanghai Index	2890, -4.37%	Bearish	Bearish
Gold	1271, -0.61%	Bearish	Bearish
WTIC Crude	68.58, 5.41%	Bullish	Bullish
Copper	3.03, -3.74%	Bearish	Bearish
Baltic Dry Index	1347, -6.00%	Bearish	Bearish
Euro	1.1661, 0.39%	Neutral	Neutral
Dollar/Yen	109.97, -0.59%	Bearish	Bearish
Dow Transports	10773, -2.72%	Bearish	Bearish
High Yield (ETF)	35.86, -0.25%	Neutral	Neutral
US 10 year Bond Yield	2.90%, -0.82%	Bullish	Bullish
Nyse Summation Index	697, -6.20%	Bearish	Neutral
US Vix	13.77, 14.94%	Bearish	Bearish
Skew	141	Bearish	Bearish
20 DMA, S and P 500	2755, At	Neutral	Neutral
50 DMA, S and P 500	2715, Above	Bullish	Neutral
200 DMA, S and P 500	2663, Above	Bullish	Neutral
20 DMA, Nifty	10738, Above	Neutral	Bullish
50 DMA, Nifty	10675, Above	Neutral	Bullish
200 DMA, Nifty	10421, Above	Neutral	Bullish
India Vix	12.02, -0.39%	Neutral	Neutral
Dollar/Rupee	67.85, -0.45%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	4	5
Bearish Indications	10	9
Outlook	Bearish	Bearish
Observation	The S and P 500 fell and the Nifty was relatively unchanged last week. Indicators are bearish. The markets have made important tops. Time to watch those stops.
On the Horizon	New Zealand – RBNZ rate decision, UK- GDP, U.S – GDP, Canada – GDP, Euro zone – German employment data, CPI

*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

The S and P 500 fell and the Nifty was mostly unchanged last week. Indicators are bearish 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. The recent yield spike and dollar strength should limit upside in the short term. The critical levels to watch are 2765 (up) and 2745 (down) on the S & P and 10900 (up) and 10700 (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.