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, 5 August 2018

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning August 06

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2840, 0.76%	Bullish	Bullish
Nifty	11361, 0.73%	Neutral **	Bullish
China Shanghai Index	2740, -4.63%	Bearish	Bearish
Gold	1223, 0.02%	Neutral	Neutral
WTIC Crude	68.49, -0.29%	Neutral	Neutral
Copper	2.76, -1.37%	Bearish	Bearish
Baltic Dry Index	1773, 5.79%	Bullish	Bullish
Euro	1.1575, -0.74%	Bearish	Bearish
Dollar/Yen	111.25, 0.24%	Neutral	Neutral
Dow Transports	11097, 1.28%	Bullish	Bullish
High Yield (ETF)	35.87, 0.09%	Neutral	Neutral
US 10 year Bond Yield	2.95%, -0.24%	Neutral	Neutral
Nyse Summation Index	462, -20.53%	Bearish	Neutral
US Vix	11.64, -10.67%	Bullish	Bullish
Skew	146	Bearish	Bearish
20 DMA, S and P 500	2811, Above	Bullish	Neutral
50 DMA, S and P 500	2771, Above	Bullish	Neutral
200 DMA, S and P 500	2702, Above	Bullish	Neutral
20 DMA, Nifty	11105, Above	Neutral	Bullish
50 DMA, Nifty	10881, Above	Neutral	Bullish
200 DMA, Nifty	10567, Above	Neutral	Neutral
India Vix	12.08, -1.89%	Neutral	Bullish
Dollar/Rupee	68.49, -0.16%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	7	8
Bearish Indications	5	4
Outlook	Bullish	Bullish
Observation	The S and P 500 and the Nifty were up last week. Indicators are bullish. The markets are close to making secondary tops. Watch those stops.
On the Horizon	Japan – GDP, Australia – RBA rate decision, New Zealand – RBNZ rate decision, U.K – GDP, U.S – PPI, CPI, Canada – Employment data

*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 were up last week. Indicators are bullish for the upcoming week. This rally is close to a major secondary top in key asset classes. 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. Tail risk is also very high. The critical levels to watch for the week are 2850 (up) and 2830 (down) on the S & P 500 and 11450 (up) and 11250 (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.