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, 8 July 2018

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning July 09

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2760, 1.52%	Bullish	Bullish
Nifty	10773, 0.54%	Neutral **	Bullish
China Shanghai Index	2747, -3.52%	Bearish	Bearish
Gold	1256, 0.10%	Neutral	Neutral
WTIC Crude	73.80, -0.47%	Neutral	Neutral
Copper	2.82, -4.79%	Bearish	Bearish
Baltic Dry Index	1612, 21.29%	Bullish	Bullish
Euro	1.1750, 0.47%	Neutral	Neutral
Dollar/Yen	110.41, -0.18%	Neutral	Neutral
Dow Transports	10474, 1.25%	Bullish	Bullish
High Yield (ETF)	35.56, 0.70%	Bullish	Bullish
US 10 year Bond Yield	2.83%, -0.63%	Bullish	Bullish
Nyse Summation Index	577, 6.62%	Bullish	Neutral
US Vix	13.37, -16.90%	Bullish	Bullish
Skew	141	Bearish	Bearish
20 DMA, S and P 500	2750, Above	Bullish	Neutral
50 DMA, S and P 500	2724, Above	Bullish	Neutral
200 DMA, S and P 500	2674, Above	Bullish	Neutral
20 DMA, Nifty	10756, Above	Neutral	Bullish
50 DMA, Nifty	10706, Above	Neutral	Bullish
200 DMA, Nifty	10456, Above	Neutral	Bullish
India Vix	12.44, -3.83%	Neutral	Bullish
Dollar/Rupee	68.75, 0.45%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	10	11
Bearish Indications	3	3
Outlook	Bullish	Bullish
Observation	The S and P 500 and the Nifty rallied last week. Indicators are bullish. The markets are about to make secondary tops.
On the Horizon	U.S – PPI, CPI, Canada – BOC 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

The S and P 500 and the Nifty rallied last week. Indicators are bullish for the upcoming week. This rally should lead to a major secondary top in key asset classes near 2830 on the S and P, 1.20 on the Euro and 11, 100 on the Nifty. 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 critical levels to watch for the week are 2770 (up) and 2750 (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.