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

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5459, -0.83%	Bearish	Bearish
Nifty	24835, 1.24%	Neutral **	Bullish
China Shanghai Index	2891, -3.07%	Bearish	Bearish
Gold	2428, 2.72%	Bullish	Bullish
WTIC Crude	76.44, -4.61%	Bearish	Bearish
Copper	4.11, -3.00%	Bearish	Bearish
CRB Index	277, -1.06%	Bearish	Bearish
Baltic Dry Index	1808, -5.44%	Bearish	Bearish
Euro	1.0856, -0.19%	Neutral	Neutral
Dollar/Yen	153.77, -2.36%	Bearish	Bearish
Dow Transports	15920, 0.86%	Bullish	Neutral
Corporate Bonds (ETF)	108.61, 0.21%	Neutral	Neutral
High Yield Bonds (ETF)	95.54, 0.35%	Neutral	Neutral
US 10-year Bond Yield	4.20%, -0.92%	Bullish	Bullish
NYSE Summation Index	614, 10%	Bullish	Neutral
US Vix	16.39, -0.79%	Bullish	Neutral
S & P 500 Skew	132	Neutral	Neutral
CNN Fear & Greed Index	Neutral	Neutral	Neutral
Nifty MMI Index	Extreme Greed	Neutral	Bearish
20 DMA, S & P 500	5544, Below	Bearish	Neutral
50 DMA, S & P 500	5436, Above	Bullish	Neutral
200 DMA, S & P 500	4981, Above	Bullish	Neutral
20 DMA, Nifty	24413, Above	Neutral	Bullish
50 DMA, Nifty	23597, Above	Neutral	Bullish
200 DMA, Nifty	21841, Above	Neutral	Bullish
S & P 500 P/E	28.52	Bearish	Neutral
Nifty P/E	23.40	Neutral	Bearish
India Vix	12.25, -17.39%	Neutral	Bullish
Dollar/Rupee	83.72, 0.00%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	7	7
Bearish Indications	9	9
Outlook	Bearish	Bearish
Observation	The S&P fell and the Nifty was up last week. Indicators are bearish for the week. Markets are correcting from resistance. Watch those stops.
On the Horizon	US – FOMC rate decision, employment data, Eurozone – CPI, German GDP, UK – BOE rate decision, Japan - BOJ rate decision
*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 fell and the Nifty was up last week. Indicators are bearish for the week. Markets are correcting among developing divergences. We are transitioning from an inflationary regime to a deflationary collapse. The markets are correcting from life highs. The Nifty is also near new highs and will likely underperform.

The past week saw US equity markets fall. Most emerging markets fell, even as interest fell. Transports rose. The Baltic dry index fell. The dollar was unchanged. Commodities fell. Valuations continue to be quite expensive, market breadth rose, and the sentiment is now neutral. Fear (S&P 500) abated 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. 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. After correcting significantly, the market has made new highs, 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 5470 (up) and 5445 (down) on the S&P 500 and 24900 (up) and 24750 (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.