Asset Class |
Weekly Level / Change |
Implication for S & P
500 |
Implication
for Nifty* |
|
S & P 500 |
4134, -0.10% |
Neutral |
Neutral |
|
Nifty |
17624, -1.14% |
Neutral ** |
Bearish |
|
China Shanghai Index |
3301, -1.11% |
Bearish |
Bearish |
|
Gold |
1994, -1.26% |
Bearish |
Bearish |
|
WTIC Crude |
77.95, -5.54% |
Bearish |
Bearish |
|
Copper |
3.99, -2.92% |
Bearish |
Bearish |
|
CRB Index |
271, -1.96% |
Bearish |
Bearish |
|
Baltic Dry Index |
1504, 4.81% |
Bullish |
Bullish |
|
Euro |
1.0990, -0.09% |
Neutral |
Neutral |
|
Dollar/Yen |
134.13, 0.27% |
Neutral |
Neutral |
|
Dow Transports |
14414, 1.17% |
Bullish |
Bullish |
|
Corporate Bonds (ETF) |
109.00, -0.36% |
Neutral |
Neutral |
|
High Yield Bonds (ETF) |
92.08, -0.32% |
Neutral |
Neutral |
|
US 10-year Bond Yield |
3.57%, 1.08% |
Bearish |
Bearish |
|
NYSE Summation Index |
301, 39% |
Bullish |
Neutral |
|
US Vix |
16.77, -1.76% |
Bullish |
Bullish |
|
Skew |
133 |
Neutral |
Neutral |
|
CNN Fear & Greed
Index |
Greed |
Bearish |
Bearish |
|
20 DMA, S & P 500 |
4092, Above |
Bullish |
Neutral |
|
50 DMA, S & P 500 |
4034, Above |
Bullish |
Neutral |
|
200 DMA, S & P 500 |
3958, Above |
Bullish |
Neutral |
|
20 DMA, Nifty |
17422, Above |
Neutral |
Bullish |
|
50 DMA, Nifty |
17504, Above |
Neutral |
Bullish |
|
200 DMA, Nifty |
17595, Above |
Neutral |
Bullish |
|
S & P 500 P/E |
22.09 |
Bearish |
Neutral |
|
Nifty P/E |
20.61 |
Neutral |
Bearish |
|
India Vix |
11.63, -2.33% |
Neutral |
Bullish |
|
Dollar/Rupee |
82.04, 0.27% |
Neutral |
Neutral |
|
Overall |
S & P 500 |
Nifty |
||
Bullish Indications |
7 |
7 |
||
Bearish Indications |
8 |
9 |
||
Outlook |
Bearish |
Bearish |
||
Observation |
The S&P 500 was unchanged and the Nifty fell last week. Indicators are bearish for
the week. The markets are back at
resistance. Watch those stops. |
|||
On the Horizon |
Eurozone – German
employment data, German GDP, German CPI, US – GDP, Japan –BOJ
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&P
500 was unchanged and the Nifty fell last week. Indicators are bearish
for the week. We are back above resistance near the 50 and 200 DMAs on the S&P
500, as we transition from an inflationary regime to a deflationary
collapse. The Nifty is below resistance near its 20 WMA close to 17750. The
current market is tracking closely the 1973/2008 moves down in the S&P 500,
implying a panic low right ahead in the upcoming months (My views do not
matter, kindly pay attention to the levels). A dollar rebound from major
support is a likely catalyst.
The past week
saw US equity markets little changed. Most emerging markets fell, following a
rise in interest rates. Transports rallied. The Baltic dry index rose. The
dollar was unchanged. Commodities fell. Valuations are quite expensive, market
breadth improved, and the sentiment is now bullish. Fear has cooled off again, despite
possible contagion risk from bank failures. The sudden steepening of the yield
curve, with rates falling, is a precursor to the next recession, and most risky
assets will underperform going forward under such conditions. 42% of the
S&P 500 report earnings this week, so a break out from the current range is
likely.
The recent
currency crisis should resume and push risky assets to new lows across the
board. Deflation is in the air despite the recent inflationary spike and bonds
are telegraphing just that. Feels like a 2008-style recession trade has begun,
with a potential decline in risk assets across the board.
The S&P
500 is encountering resistance near its recent highs. Monthly MACDs on most
global markets are still negative. This spells trouble and opens significant
downside risk ahead. We have got bounces from recent lows without
capitulation. This suggests the lows may not be in and the regime has
changed from buying the dip to selling the rip. We may get a final
flush down soon. Risky assets should continue breaking to the downside
across the board, as downward earnings revisions are underway.
The Fed is
aggressively tightening into a recession. 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 recent countertrend moves.
The epic
correction signal occurred with retail, hedge funds, and speculators all in, in
January 2022, suggesting a major top is in. The moment of reckoning is here. With
extremely high valuations, a crash is on the menu. Low volatility suggests
complacency and downside ahead.
We rallied 46%
right after the Great Depression (the 1930s) first collapse and we rallied over
120% in our most recent rally of the COVID-19 lows. After extreme euphoria for
the indices, a highly probable selloff to the 3300 area is emerging on the
S&P 500, and 15000 should arrive on the Nifty in the next few months. The
Nifty is catching up with other assets on the downside.
The trend has
changed from bullish to bearish and markets risk getting a reality check and being smashed by contagion risk from an economic slowdown and a strong dollar. Global
yield curves have inverted significantly reflecting a major upcoming recession.
Looking for significant underperformance in the Nifty going forward on
challenging macros.
The critical
levels to watch for the week are 4150 (up) and 4120 (down) on the S&P 500
and 17700 (up) and 17550 (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 (though technically
overbought in the short term) is increasingly looking like the asset class to
own in the upcoming decade. You can check out last week’s report for a
comparison. Love your thoughts and feedback.
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