Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning September 02

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5648, 0.24%	Neutral	Neutral
Nifty	25236, 1.66%	Neutral **	Bullish
China Shanghai Index	2842, -0.43%	Neutral	Neutral
Gold	2536, -0.40%	Neutral	Neutral
WTIC Crude	73.65, -1.58%	Bearish	Bearish
Copper	4.22, -0.27%	Neutral	Neutral
CRB Index	277, -0.61%	Bearish	Bearish
Baltic Dry Index	1814, 2.95%	Bullish	Bullish
Euro	1.1047, -1.28%	Bearish	Bearish
Dollar/Yen	146.18, 1.25%	Bullish	Bullish
Dow Transports	16044, 0.46%	Neutral	Neutral
Corporate Bonds (ETF)	111.21, -0.86%	Bearish	Bearish
High Yield Bonds (ETF)	96.82, -0.04%	Neutral	Neutral
US 10-year Bond Yield	3.91%, 3.00%	Bearish	Bearish
NYSE Summation Index	912, 18%	Bullish	Neutral
US Vix	15.00, -5.42%	Bullish	Neutral
S & P 500 Skew	159	Bearish	Neutral
CNN Fear & Greed Index	Greed	Bearish	Neutral
Nifty MMI Index	Fear	Neutral	Bullish
20 DMA, S & P 500	5486, Above	Bullish	Neutral
50 DMA, S & P 500	5503, Above	Bullish	Neutral
200 DMA, S & P 500	5128, Above	Bullish	Neutral
20 DMA, Nifty	24593, Above	Neutral	Bullish
50 DMA, Nifty	24440, Above	Neutral	Bullish
200 DMA, Nifty	22466, Above	Neutral	Bullish
S & P 500 P/E	29.51	Bearish	Neutral
Nifty P/E	23.47	Neutral	Bearish
India Vix	13.39, -1.18%	Neutral	Bullish
Dollar/Rupee	83.87, 0.08%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	7	8
Bearish Indications	8	6
Outlook	Bearish	Bullish
Observation	The S&P was unchanged and the Nifty rose last week. Indicators are mixed for the week. Markets are back at resistance. Watch those stops.
On the Horizon	US – Employment data
*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 was little changed, and the Nifty rose last week. Indicators are mixed for the week. Markets are back at resistance. We are transitioning from an inflationary regime to a deflationary one. The sentiment is pointing to greed, and the current bounce may stall near prior highs, after which carry trade liquidation may resume. The Nifty is at new highs and will likely underperform after this bounce.

The past week saw US equity markets rise marginally. Most emerging markets fell as interest rates rose. Transports were unchanged. The Baltic dry index rose. The dollar rose. Commodities fell. Valuations are expensive, market breadth improved, and the sentiment is bullish. This week, fear (S&P 500) fell as a possible FED Pivot looms.

After this rally, a currency crisis should resume and push risky assets to new lows. Despite the recent inflationary spike, deflation is in the air, 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. 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 5660 (up) and 5635 (down) on the S&P 500 and 25300 (up) and 25150 (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 again and likely be a sell on every rise. Gold increasingly looks 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. 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.