Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning May 06

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5128, 0.55%	Bullish	Bullish
Nifty	22476, 0.25%	Neutral **	Neutral
China Shanghai Index	3105, 0.52%	Bullish	Bullish
Gold	2310, -1.07%	Bearish	Bearish
WTIC Crude	77.99, -6.99%	Bearish	Bearish
Copper	4.57, -0.02%	Neutral	Neutral
CRB Index	287, -3.48%	Bearish	Bearish
Baltic Dry Index	1876, 9.01%	Bullish	Bullish
Euro	1.0763, 0.66%	Bullish	Bullish
Dollar/Yen	152.99, -3.37%	Bearish	Bearish
Dow Transports	15348, 1.17%	Bullish	Bullish
Corporate Bonds (ETF)	106.42, 1.23%	Bullish	Bullish
High Yield Bonds (ETF)	94.25, 0.55%	Bullish	Bullish
US 10-year Bond Yield	4.51%, -2.95%	Bullish	Bullish
NYSE Summation Index	210, 54%	Bullish	Neutral
US Vix	13.49, -10.25%	Bullish	Bullish
S & P 500 Skew	135	Neutral	Neutral
CNN Fear & Greed Index	Fear	Bullish	Neutral
Nifty MMI Index	Greed	Neutral	Bearish
20 DMA, S & P 500	5083, Above	Bullish	Neutral
50 DMA, S & P 500	5130, Below	Bearish	Neutral
200 DMA, S & P 500	4704, Above	Bullish	Neutral
20 DMA, Nifty	22454, Above	Neutral	Bullish
50 DMA, Nifty	22286, Above	Neutral	Bullish
200 DMA, Nifty	20756, Above	Neutral	Bullish
S & P 500 P/E	27.83	Bearish	Neutral
Nifty P/E	21.87	Neutral	Bearish
India Vix	14.62, 33.80%	Neutral	Bearish
Dollar/Rupee	83.38, -0.02%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	13	12
Bearish Indications	6	7
Outlook	Bullish	Bullish
Observation	The S&P rose and the Nifty was unchanged last week. Indicators are bullish for the week. Markets are at resistance. Watch those stops.
On the Horizon	UK – BOE rate decision, GDP
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Data courtesy stockcharts.com, investing.com, multpl.com, nseindia.com, tickertape.in
**Neutral	Changes less than 0.5% are considered neutral

 

The S&P 500 and the Nifty rose slightly 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 fell. Transports rose. The Baltic dry index rose. The dollar fell. Commodities fell. Valuations continue to be quite expensive, market breadth rose, and the sentiment is now bearish. Fear (S&P 500) 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 5140 (up) and 5115 (down) on the S&P 500 and 22550 (up) and 22400 (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.