Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 29

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5100, 2.67%	Bullish	Bullish
Nifty	22420, 1.23%	Neutral **	Bullish
China Shanghai Index	3089, 0.76%	Bullish	Bullish
Gold	2350, -2.16%	Bearish	Bearish
WTIC Crude	83.66, 0.63%	Bullish	Bullish
Copper	4.57, 1.70%	Bullish	Bullish
CRB Index	297, -0.44%	Neutral	Neutral
Baltic Dry Index	1721, -10.32%	Bearish	Bearish
Euro	1.0693, 0.37%	Neutral	Neutral
Dollar/Yen	158.35, 2.41%	Bullish	Bullish
Dow Transports	15171, 0.58%	Bullish	Bullish
Corporate Bonds (ETF)	105.12, 0.10%	Neutral	Neutral
High Yield Bonds (ETF)	93.70, 0.78%	Bullish	Bullish
US 10-year Bond Yield	4.66%, 0.87%	Bearish	Bearish
NYSE Summation Index	137, -13%	Bearish	Neutral
US Vix	15.03, -19.67%	Bullish	Bullish
Skew	141	Bearish	Bearish
CNN Fear & Greed Index	Fear	Bullish	Bullish
20 DMA, S & P 500	5116, Below	Bearish	Neutral
50 DMA, S & P 500	5124, Below	Bearish	Neutral
200 DMA, S & P 500	4690, Above	Bullish	Neutral
20 DMA, Nifty	22404, Above	Neutral	Bullish
50 DMA, Nifty	22220, Above	Neutral	Bullish
200 DMA, Nifty	20692, Above	Neutral	Bullish
S & P 500 P/E	27.68	Bearish	Neutral
Nifty P/E	22.00	Neutral	Bearish
India Vix	10.93, -18.82%	Neutral	Bullish
Dollar/Rupee	83.40, 0.06%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	10	14
Bearish Indications	8	5
Outlook	Bullish	Bullish
Observation	The S&P and the Nifty rose last week. Indicators are bullish for the week. Markets are correcting. Watch those stops.
On the Horizon	US – FOMC rate decision, Employment data, Eurozone – German GDP, CPI
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Data courtesy stockcharts.com, investing.com, multpl.com, nseindia.com
**Neutral	Changes less than 0.5% are considered neutral

 

The S&P 500 and the Nifty rose last week. Indicators are bullish for the week. Markets are correcting. We are transitioning from an inflationary regime to a deflationary collapse. We have corrected below the 50 DMA, as we exit bearish seasonality. The oversold bounce could encounter resistance near the 50 DMA. The Nifty has started to correct and will likely underperform.

The past week saw US equity markets rise. Most emerging markets rose, even as interest rates rose. Transports rose. The Baltic dry index fell. The dollar was little changed. Commodities were unchanged. Valuations continue to be quite expensive, market breadth fell, and the sentiment is now bearish. Fear subsided this week, as a possible reality check from an immediate FED Pivot loom.

After this rally, a 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 for a decline in risk assets across the board. The current market is tracking closely the 2000 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 S&P 500 is near all-time highs. We have bounced 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 earnings growth peaks.

The Fed has aggressively tightened into a recession. Deflationary busts often begin after major inflationary scares. The market has rebounded after correcting significantly, and more is left on the downside. The Dollar, commodities, and bond yields are continuing to flash major warning signs.

Global yield curves have inverted significantly reflecting a major upcoming recession. The recent steepening of the yield curve, within an inverted context, with rates falling, is a precursor to the next recession, and the riskiest assets will underperform going forward under such conditions. 

The critical levels to watch for the week are 5115 (up) and 5085 (down) on the S&P 500 and 22500 (up) and 22350 (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, (though overextended short-term) to own over the next decade. (Gold exploded almost 8 times higher over the decade following the dot-com bust in 2000, just imagine what would happen when this AI bubble bursts? following the recent crypto bubble burst) You can check out last week’s report for a comparison. Love your thoughts and feedback.