About

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.

Sunday 14 February 2021

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning February 15

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3935, 1.23%	Bullish	Bullish
Nifty	15163, 1.60%	Neutral **	Bullish
China Shanghai Index	3655, 4.54%	Bullish	Bullish
Gold	1825, 0.64%	Bullish	Bullish
WTIC Crude	59.72, 5.05%	Bullish	Bullish
Copper	3.80, 4.78%	Bullish	Bullish
Baltic Dry Index	1335, 0.45%	Neutral	Neutral
Euro	1.2120, 0.65%	Bullish	Bullish
Dollar/Yen	104.92, -0.42%	Neutral	Neutral
Dow Transports	13175, 3.02%	Bullish	Bullish
High Yield (Bond ETF)	109.65, 0.36%	Neutral	Neutral
US 10 year Bond Yield	1.21%, 3.08%	Bearish	Bearish
NYSE Summation Index	915, 22.21%	Bullish	Neutral
US Vix	19.97, -4.31%	Bullish	Bullish
Skew	138	Neutral	Neutral
20 DMA, S and P 500	3842, Above	Bullish	Neutral
50 DMA, S and P 500	3770, Above	Bullish	Neutral
200 DMA, S and P 500	3402, Above	Bullish	Neutral
20 DMA, Nifty	14585, Above	Neutral	Bullish
50 DMA, Nifty	14136, Above	Neutral	Bullish
200 DMA, Nifty	11823, Above	Neutral	Bullish
S & P 500 P/E	40.06	Bearish	Neutral
Nifty P/E	41.58	Neutral	Bearish
India Vix	22.04, -5.86%	Neutral	Bullish
Dollar/Rupee	72.60, -0.30%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	12	13
Bearish Indications	2	2
Outlook	Bullish	Bullish
Observation	The S and P and the Nifty rallied last week. Indicators are bullish for the week. The markets are about to begin a great depression style collapse. Watch those stops.
On the Horizon	Japan – GDP, UK – CPI

*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 made new highs last week. Indicators are bullish 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 3 lost 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 3950 (up) and 3920 (down) on the S & P 500 and 15250 (up) and 15100 (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.

No comments:

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.