Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning July 15

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5615, 0.87%	Bullish	Bullish
Nifty	24502, 0.73%	Neutral **	Bullish
China Shanghai Index	2971, 0.72%	Bullish	Bullish
Gold	2416, 0.76%	Bullish	Bullish
WTIC Crude	81.00, -2.60%	Bearish	Bearish
Copper	4.58, -1.52%	Bearish	Bearish
CRB Index	290, -1.02%	Bearish	Bearish
Baltic Dry Index	1997, 1.58%	Bullish	Bullish
Euro	1.0907, 0.66%	Bullish	Bullish
Dollar/Yen	157.90, -1.75%	Bearish	Bearish
Dow Transports	15523, 1.60%	Bullish	Neutral
Corporate Bonds (ETF)	109.17, 0.95%	Bullish	Bullish
High Yield Bonds (ETF)	95.24, 0.69%	Bullish	Bullish
US 10-year Bond Yield	4.19%, -2.45%	Bullish	Bullish
NYSE Summation Index	321, 89%	Bullish	Neutral
US Vix	12.46, -0.16%	Neutral	Neutral
S & P 500 Skew	151	Bearish	Neutral
CNN Fear & Greed Index	Greed	Bearish	Neutral
Nifty MMI Index	Extreme Greed	Neutral	Bearish
20 DMA, S & P 500	5509, Above	Bullish	Neutral
50 DMA, S & P 500	5363, Above	Bullish	Neutral
200 DMA, S & P 500	4918, Above	Bullish	Neutral
20 DMA, Nifty	23993, Above	Neutral	Bullish
50 DMA, Nifty	23183, Above	Neutral	Bullish
200 DMA, Nifty	21627, Above	Neutral	Bullish
S & P 500 P/E	29.34	Bearish	Neutral
Nifty P/E	23.32	Neutral	Bearish
India Vix	13.73, 8.11%	Neutral	Bearish
Dollar/Rupee	83.52, 0.02%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	13	12
Bearish Indications	8	7
Outlook	Bullish	Bullish
Observation	The S&P and the Nifty were up last week. Indicators are bullish for the week. Markets are at resistance among divergences. Watch those stops.
On the Horizon	China – GDP Eurozone – CPI, ECB rate decision, UK - CPI
*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 were up last week. Indicators are bullish for the week. Markets are at resistance near all-time highs among developing divergences. We are transitioning from an inflationary regime to a deflationary collapse. The markets are at new highs and risk-reward is poor at these levels. The Nifty is also at new highs and will likely underperform.

The past week saw US equity markets up. Most emerging markets were up, as interest rates fell. Transports led up. The Baltic dry index rose. The dollar fell. Commodities fell. Valuations continue to be quite expensive, market breadth rebounded, and the sentiment is now bullish. Fear (S&P 500) was unchanged 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 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 made new highs 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 5630 (up) and 5600 (down) on the S&P 500 and 24600 (up) and 24400 (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.