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

 

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	3924, - 3.29%	Bearish	Bearish
Nifty	17540, - 0.11%	Neutral **	Neutral
China Shanghai Index	3187, - 1.54%	Bearish	Bearish
Gold	1723, - 1.55%	Bearish	Bearish
WTIC Crude	87.25, - 6.24%	Bearish	Bearish
Copper	3.40, - 8.01%	Bearish	Bearish
Baltic Dry Index	1086, 0.37%	Neutral	Neutral
Euro	0.9955, - 0.06%	Neutral	Neutral
Dollar/Yen	140.21, 1.96%	Bullish	Bullish
Dow Transports	13738, - 4.47%	Bearish	Bearish
Corporate Bonds (ETF)	108.39, - 2.45%	Bearish	Bearish
High Yield Bonds (ETF)	91.59, - 2.14%	Bearish	Bearish
US 10-year Bond Yield	3.20%, 4.05%	Bearish	Bearish
NYSE Summation Index	180, - 71%	Bearish	Neutral
US Vix	25.47, - 0.35%	Neutral	Neutral
Skew	120	Neutral	Neutral
CNN Fear & Greed	Fear	Bullish	Bullish
20 DMA, S & P 500	4144, Below	Bearish	Neutral
50 DMA, S & P 500	4020, Below	Bearish	Neutral
200 DMA, S & P 500	4290, Below	Bearish	Neutral
20 DMA, Nifty	17599, Above	Neutral	Bearish
50 DMA, Nifty	16778, Above	Neutral	Bullish
200 DMA, Nifty	16970, Above	Neutral	Bullish
S & P 500 P/E	19.83	Bearish	Neutral
Nifty P/E	20.94	Neutral	Bearish
India Vix	19.55, 7.33%	Neutral	Bearish
Dollar/Rupee	79.71, - 0.30%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	2	4
Bearish Indications	14	12
Outlook	Bearish	Bearish
Observation	The S and P fell and the Nifty was unchanged last week. Indicators are bearish for the week. The markets are failing at resistance. Watch those stops.
On the Horizon	Japan – GDP, Eurozone – German GDP, ECB 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 fell and the Nifty was unchanged last week. Indicators are bearish for the week. We are selling off from resistance near the 200 DMA on the S & P, and the sell-off is likely to continue with bounces being sold into. The past week saw a strong sell-off in global markets, following a rise in interest rates. The Baltic dry index has absolutely cratered the last few weeks. The dollar held onto its gains from earlier weeks. Copper and oil caught up to the downside with other commodities. The Nifty will likely catch up with other assets on the downside soon.

The upcoming currency crisis should push risky assets to new lows across the board. Deflation is in the air despite the recent inflationary spike and the Chinese Yuan, Euro, government bonds, and commodities are telegraphing just that. Feels like a 2000-style recession trade has begun, with a decline in risk assets across the board. (My views don’t matter, kindly pay attention to the levels).

The S&P 500 is below the 200 DMA and just failed at this important mark, after spending a very long time above it, and its 200 DMA is declining. Monthly MACDs on most global markets are still negative. This spells trouble and opens up significant downside risk ahead.

We have got bounces without capitulation. This suggests the lows may not be in and the regime is changing from buying the dip to selling the rip. We may get a final flush down soon. Risky assets are breaking to the downside across the board. Downward earnings revisions are likely soon.

The Fed is aggressively tightening into a recession. Tail risk while moderating is still high.  Deflationary busts often begin after major inflationary scares. The market has corrected significantly and more is left on the downside.

The Dollar, commodities, and bond yields are continuing to flash major warning signs despite the recent counter-trend move up. The epic correction signal occurred with retail, hedge funds, and speculators all in, in the recent melt-up in January, suggesting a major top is in. The moment of reckoning is here.  Technicals are tracking fundamentals and have recently turned bearish. 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 Depression (the 1930s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 3500 area is emerging on the S and P, and 15000 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) are set to repeat across the globe. 

The trend has changed from bullish to bearish and the markets are getting a reality check and getting smashed by rising rates and a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. Yield curves are about to invert yet again reflecting a major upcoming recession. 

The critical levels to watch for the week are 3935 (up) and 3915 (down) on the S & P 500 and 17650 (up) and 17450 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets.  High beta / P/E will get torched yet again and will likely prove to be a sell on every rise. Gold is increasingly looking like the asset class to own in the upcoming decade despite the recent selloff. You can check out last week’s report for a comparison. Love your thoughts and feedback.