Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 05

 

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	4020, 1.14%	Bullish	Bullish
Nifty	14867, 2.48%	Neutral **	Bullish
China Shanghai Index	3484, 1.93%	Bullish	Bullish
Gold	1731, -0.11%	Neutral	Neutral
WTIC Crude	61.30, 0.54%	Bullish	Bullish
Copper	4.02, -1.30%	Bearish	Bearish
Baltic Dry Index	2072, -4.87%	Bearish	Bearish
Euro	1.1764, -0.27%	Neutral	Neutral
Dollar/Yen	110.71, 0.97%	Bullish	Bullish
Dow Transports	14748, 0.98%	Bullish	Bullish
High Yield (Bond ETF)	108.64, 0.12%	Neutral	Neutral
US 10 year Bond Yield	1.71%, 2.49%	Bearish	Bearish
NYSE Summation Index	501, -2.33%	Bearish	Neutral
US Vix	17.33, -8.11%	Bullish	Bullish
Skew	136	Neutral	Neutral
20 DMA, S and P 500	3930, Above	Bullish	Neutral
50 DMA, S and P 500	3888, Above	Bullish	Neutral
200 DMA, S and P 500	3553, Above	Bullish	Neutral
20 DMA, Nifty	14836, Above	Neutral	Bullish
50 DMA, Nifty	14748, Above	Neutral	Bullish
200 DMA, Nifty	12496, Above	Neutral	Bullish
S & P 500 P/E	40.93	Bearish	Neutral
Nifty P/E	33.60	Neutral	Bearish
India Vix	19.99, -3.21%	Neutral	Bullish
Dollar/Rupee	73.39, 1.07%	Neutral	Bearish
Overall	S & P 500	Nifty
Bullish Indications	9	11
Bearish Indications	5	5
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	US – PPI, India - 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 rallied last week. Indicators are bullish for the week. Deflationary busts often begin with inflation scares (the market is calling the Fed’s bluff) and gold is telegraphing just that. Corporate bonds are flashing early warning signs. 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. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 80% in our most recent rally of the lows in the last 12 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 are about to plunge yet again reflecting a major recession. The critical levels to watch for the week are 4030 (up) and 4010 (down) on the S & P 500 and 14950 (up) and 14800 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. China, Gold, Bonds, and the Nasdaq are on Ichimoku sell signals while the Dollar, S & P 500, and Nifty are on Ichimoku buy signals so somethings got to give. High beta / p/e is about to get torched in April. You can check out last week’s report for a comparison. Love your thoughts and feedback.