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

 

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3811, -2.45%	Bearish	Bearish
Nifty	14529, -3.02%	Neutral **	Bearish
China Shanghai Index	3509, -5.06%	Bearish	Bearish
Gold	1732, -2.53%	Bearish	Bearish
WTIC Crude	61.62, 4.02%	Bullish	Bullish
Copper	4.11, 0.60%	Bullish	Bullish
Baltic Dry Index	1675, -1.35%	Bearish	Bearish
Euro	1.2076, -0.34%	Neutral	Neutral
Dollar/Yen	106.58, 1.09%	Bullish	Bullish
Dow Transports	13331, 0.43%	Neutral	Neutral
High Yield (Bond ETF)	108.18, -1.02%	Bearish	Bearish
US 10 year Bond Yield	1.41%, 3.32%	Bearish	Bearish
NYSE Summation Index	716, -18.65%	Bearish	Neutral
US Vix	27.95, 26.76%	Bearish	Bearish
Skew	136	Neutral	Neutral
20 DMA, S and P 500	3875, Below	Bearish	Neutral
50 DMA, S and P 500	3808, Above	Bullish	Neutral
200 DMA, S and P 500	3448, Above	Bullish	Neutral
20 DMA, Nifty	14957, Below	Neutral	Bearish
50 DMA, Nifty	14445, Above	Neutral	Bullish
200 DMA, Nifty	12108, Above	Neutral	Bullish
S & P 500 P/E	38.80	Bearish	Neutral
Nifty P/E	39.65	Neutral	Bearish
India Vix	28.14, 26.48%	Neutral	Bearish
Dollar/Rupee	73.94, 1.91%	Neutral	Bearish
Overall	S & P 500	Nifty
Bullish Indications	5	5
Bearish Indications	10	12
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	Eurozone – CPI, German employment data, US - Employment data
*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. Deflationary busts often begin with inflation scares and gold is telegraphing just that. 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) has dented global GDP significantly and will 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 3825 (up) and 3800 (down) on the S & P 500 and 14600 (up) and 14450 (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.