Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning February 01

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3714, -3.31%	Bearish	Bearish
Nifty	13635, -5.13%	Neutral **	Bearish
China Shanghai Index	3483, -3.43%	Bearish	Bearish
Gold	1850, -0.36%	Neutral	Neutral
WTIC Crude	52.13, -0.27%	Neutral	Neutral
Copper	3.54, -2.37%	Bearish	Bearish
Baltic Dry Index	1452, -19.78%	Bearish	Bearish
Euro	1.2138, -0.24%	Neutral	Neutral
Dollar/Yen	104.70, 0.89%	Bullish	Bullish
Dow Transports	12088, -5.98%	Bearish	Bearish
High Yield (Bond ETF)	108.41, -0.49%	Neutral	Neutral
US 10 year Bond Yield	1.07%, -2.25%	Bullish	Bullish
NYSE Summation Index	715, -23.11%	Bearish	Neutral
US Vix	33.09, 51.03%	Bearish	Bearish
Skew	134	Neutral	Neutral
20 DMA, S and P 500	3792, Below	Bearish	Neutral
50 DMA, S and P 500	3716, Below	Bearish	Neutral
200 DMA, S and P 500	3350, Above	Bullish	Neutral
20 DMA, Nifty	14285, Below	Neutral	Bearish
50 DMA, Nifty	13743, Below	Neutral	Bearish
200 DMA, Nifty	11539, Above	Neutral	Bullish
S & P 500 P/E	37.82	Bearish	Neutral
Nifty P/E	36.57	Neutral	Bearish
India Vix	25.34, 13.02%	Neutral	Bearish
Dollar/Rupee	72.91, -0.10%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	3	3
Bearish Indications	10	11
Outlook	Bearish	Bearish
Observation	The S and P and the Nifty fell last week. Indicators are bearish for the week. The markets are about to begin a great depression style collapse. Watch those stops.
On the Horizon	UK – BOE rate decision, US – Employment data, India – Union budget, RBI rate decision
*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 and the Nifty fell last week. Indicators are bearish for the week. The epic crash signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up and break out of the long term broadening top, suggesting a major top is imminent. The moment of reckoning is very near.  Technicals are about to track fundamentals and turn bearish. The market is yet to price in one of the worst earnings decline periods in stock market history. With extremely high valuations, a crash is on the menu. Low volatility suggests complacency and more downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 65% 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 3000 area is emerging on the S and P, and 10000 should arrive on the Nifty in the next few months. 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 in a year and we stay there till 2030, scary? The markets are very close to an epic meltdown 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 may be as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century as we make a major top in global equity markets. The market is looking like the short of a lifetime with topping action in the transports, other global indices, and commodities. High valuations continue.

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 is about to change from bullish to bearish and the markets are about to get smashed by a rebounding dollar. Looking for significant underperformance 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 several bearish divergences and overstretched 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 of late as interest rates plunge into a recession. The critical levels to watch for the week are 3725 (up) and 3710 (down) on the S & P 500 and 13700 (up) and 13550 (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.