Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning September 09

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5408, -4.25%	Bearish	Bearish
Nifty	24852, -1.52%	Neutral **	Bearish
China Shanghai Index	2766, -2.69%	Bearish	Bearish
Gold	2527, -0.12%	Neutral	Neutral
WTIC Crude	68.16, -6.60%	Bearish	Bearish
Copper	4.07, -3.65%	Bearish	Bearish
CRB Index	267, -3.67%	Bearish	Bearish
Baltic Dry Index	1941, 7.00%	Bullish	Bullish
Euro	1.1083, 0.33%	Neutral	Neutral
Dollar/Yen	142.27, -2.66%	Bearish	Bearish
Dow Transports	15427, -3.84%	Bearish	Neutral
Corporate Bonds (ETF)	112.33, 1.01%	Bullish	Bullish
High Yield Bonds (ETF)	96.49, -0.34%	Neutral	Neutral
US 10-year Bond Yield	3.72%, -4.89%	Bullish	Bullish
NYSE Summation Index	849, -7%	Bearish	Neutral
US Vix	22.38, 49.20%	Bearish	Neutral
S & P 500 Skew	149	Bearish	Neutral
CNN Fear & Greed Index	Fear	Bullish	Neutral
Nifty MMI Index	Extreme Fear	Neutral	Bullish
20 DMA, S & P 500	5537, Below	Bearish	Neutral
50 DMA, S & P 500	5505, Below	Bearish	Neutral
200 DMA, S & P 500	5148, Above	Bullish	Neutral
20 DMA, Nifty	24822, Above	Neutral	Bullish
50 DMA, Nifty	24592, Above	Neutral	Bullish
200 DMA, Nifty	22609, Above	Neutral	Bullish
S & P 500 P/E	28.26	Bearish	Neutral
Nifty P/E	23.10	Neutral	Bearish
India Vix	15.22, 13.63%	Neutral	Bearish
Dollar/Rupee	83.99, 0.14%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	5	7
Bearish Indications	13	9
Outlook	Bearish	Bearish
Observation	The S&P and the Nifty fell last week. Indicators are bearish for the week. Markets are correcting from resistance. Watch those stops.
On the Horizon	US – PPI, CPI, Japan – GDP, UK – GDP, Eurozone – ECB 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 and the Nifty fell last week. Indicators are bearish for the week. Markets are correcting from resistance. We are transitioning from an inflationary regime to a deflationary one. The sentiment is back to fear mode, and prior highs will likely act as resistance, after which carry trade liquidation may resume. The Nifty is correcting from new highs and will likely underperform.

The past week saw US equity markets fall. Most emerging markets fell even as interest rates fell. Transports fell. The Baltic dry index rose. The dollar was unchanged. Commodities fell. Valuations are expensive, market breadth deteriorated, and the sentiment is bearish. This week, fear (S&P 500) spiked higher 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 correcting from 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 5420 (up) and 5395 (down) on the S&P 500 and 24950 (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 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.