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Ahead of the Curve provides you with 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 includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Sunday 6 September 2020

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning September 07


Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

3427, -2.31%

Bearish

Bearish

Nifty

11334, -2.69%

Neutral **

Bearish

China Shanghai Index

3355, -1.42%

Bearish

Bearish

Gold

1941, -1.73%

Bearish

Bearish

WTIC Crude

39.50, -8.08%

Bearish

Bearish

Copper

3.08, 2.70%

Bullish

Bullish

Baltic Dry Index

1395, -6.25%

Bearish

Bearish

Euro

1.1838, -0.55%

Bearish

Bearish

Dollar/Yen

106.25, 0.86%

Bullish

Bullish

Dow Transports

11226, -0.85%

Bearish

Bearish

High Yield (Bond ETF)

105.06, -0.69%

Bearish

Bearish

US 10 year Bond Yield

0.72%, -0.47%

Neutral

Neutral

Nyse Summation Index

545, -19.31%

Bearish

Neutral

US Vix

30.75, 33.93%

Bearish

Bearish

Skew

133

Neutral

Neutral

20 DMA, S and P 500

3429, Below

Bearish

Neutral

50 DMA, S and P 500

3299, Above

Bullish

Neutral

200 DMA, S and P 500

3093, Above

Bullish

Neutral

20 DMA, Nifty

11403, Below

Neutral

Bearish

50 DMA, Nifty

11096, Above

Neutral

Bullish

200 DMA, Nifty

10810, Above

Neutral

Bullish

S & P 500 P/E

29.46

Bearish

Neutral

Nifty P/E

32.49

Neutral

Bearish

India Vix

22.15, 20.74%

Neutral

Bearish

Dollar/Rupee

73.29, 0.24%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

4

4

Bearish Indications

12

13

Outlook

Bearish

Bearish

Observation

The S and P and the Nifty fell last week. Indicators are bearish for the week.

The markets have begun a great depression style collapse. Watch those stops.

On the Horizon

Euro Zone – ECB rate decision, UK – GDP, US – PPI, CPI, Japan – GDP,

*Nifty

India’s Benchmark Stock Market Index

Raw Data

Courtesy Stock charts, investing.com, multpl.com, NSE

**Neutral

Changes less than 0.5% are considered neutral

 


The S and P 500 and the Nifty fell last week. Indicators are bearish for the coming week. The recent rally to the prior highs is on borrowed time as we experience one of the worst earnings decline period in stock market history with extremely high valuations amid a lot of bearish divergences and a September / October crash is on the menu. We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 50% in our most recent rally of the lows in a similar 6 month period. After extreme euphoria for the indices a highly probable selloff to the 2700 area is emerging on the S and P, and 9000 should arrive on the Nifty in short order. The FED is repeating the Japan experiment and the lost 3 decades in Japan (1989-2019) is set to repeat across the globe. SPX 1500 and lower by year end and we stay there till 2050, scary? The markets are very close to an epic melt down and the SPX is headed way lower. The markets are overvalued, overbought and out of touch with economic realities. Long term, the epic meltdown is set to continue resulting in a 5 year plus bear market with lot lower levels maybe as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century and we have made a major top in global equity markets. The market is looking like the short of a life time with non-conformations from the transports, other global indices and commodities. High valuations continue. The breakdown in Crude and the Euro is a precursor to yet another massive drop in the S and P 500. The recent global virus epidemic (black swan) is likely to dent global GDP significantly and usher in a depression much faster than most think. The trend has changed from bullish to bearish and the markets are getting smashed by a strong dollar. Looking for significant under performance in the Nifty going forward on rapidly deteriorating macros. A 5 year deflationary wave has started in key asset classes like the Euro, stocks and commodities amidst a number of bearish divergences and over stretched valuations. We are entering a multi-year great depression. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Tail risk has been very high off late as the yield curve inverts into a recession. The critical levels to watch for the week are 3440 (up) and 3415 (down) on the S & P 500 and 11400 (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 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.