Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning June 03

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5278, -0.51%	Bearish	Bearish
Nifty	22531, -1.86%	Neutral **	Bearish
China Shanghai Index	3087, -0.07%	Neutral	Neutral
Gold	2348, 0.48%	Neutral	Neutral
WTIC Crude	77.18, -0.69%	Bearish	Bearish
Copper	4.63, -2.93%	Bearish	Bearish
CRB Index	290, -1.40%	Bearish	Bearish
Baltic Dry Index	1815, 1.00%	Bullish	Bullish
Euro	1.0849, 0.04%	Neutral	Neutral
Dollar/Yen	157.29, 0.19%	Neutral	Neutral
Dow Transports	15238, 1.03%	Bullish	Neutral
Corporate Bonds (ETF)	106.89, -0.08%	Neutral	Neutral
High Yield Bonds (ETF)	94.35, 0.07%	Neutral	Neutral
US 10-year Bond Yield	4.50%, 0.81%	Bearish	Bearish
NYSE Summation Index	526, -21%	Bearish	Neutral
US Vix	12.92, 8.30%	Bearish	Bearish
S & P 500 Skew	148	Bearish	Neutral
CNN Fear & Greed Index	Neutral	Neutral	Neutral
Nifty MMI Index	Fear	Neutral	Bullish
20 DMA, S & P 500	5255, Above	Bullish	Neutral
50 DMA, S & P 500	5181, Above	Bullish	Neutral
200 DMA, S & P 500	4774, Above	Bullish	Neutral
20 DMA, Nifty	22476, Above	Neutral	Bullish
50 DMA, Nifty	22387, Above	Neutral	Bullish
200 DMA, Nifty	21026, Above	Neutral	Bullish
S & P 500 P/E	27.43	Bearish	Neutral
Nifty P/E	21.40	Neutral	Bearish
India Vix	24.60, 13.32%	Neutral	Bearish
Dollar/Rupee	83.44, 0.46%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	5	5
Bearish Indications	9	9
Outlook	Bearish	Bearish
Observation	The S&P and the Nifty fell last week. Indicators are bearish for the week. Markets are at resistance. Watch those stops.
On the Horizon	US – Employment data, Eurozone – ECB rate decision, India - Election results
*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 fell last week. Indicators are bearish for the week. Markets are at resistance near all-time highs. We are transitioning from an inflationary regime to a deflationary collapse. The markets are hitting resistance and risk-reward is poor at these levels. The Nifty is near resistance and will likely underperform.

The past week saw US equity markets fall. Most emerging markets fell, as interest rates rose. Transports rebounded. The Baltic dry index rose. The dollar was unchanged. Commodities fell. Valuations continue to be quite expensive, market breadth declined, and the sentiment is now neutral. Fear (S&P 500) rose this week, as a possible reality check from a 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, 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 continue 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 5290 (up) and 5265 (down) on the S&P 500 and 22600 (up) and 22450 (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.