Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning September 30

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5738, 0.62%	Bullish	Bullish
Nifty	26179, 1.50%	Neutral **	Bullish
China Shanghai Index	3088, 12.81%	Bullish	Bullish
Gold	2681, 1.75%	Bullish	Bullish
WTIC Crude	68.64, -4.56%	Bearish	Bearish
Copper	4.59, 5.68%	Bullish	Bullish
CRB Index	286, 1.26%	Bullish	Bullish
Baltic Dry Index	2110, 6.73%	Bullish	Bullish
Euro	1.1163, 0.01%	Neutral	Neutral
Dollar/Yen	142.19, -1.20%	Bearish	Bearish
Dow Transports	16186, 2.74%	Bullish	Neutral
Corporate Bonds (ETF)	113.26, -0.17%	Neutral	Neutral
High Yield Bonds (ETF)	97.79, 0.05%	Neutral	Neutral
US 10-year Bond Yield	3.75%, 0.26%	Neutral	Neutral
NYSE Summation Index	1105, 6%	Bullish	Neutral
US Vix	16.96, 5.02%	Bearish	Neutral
S & P 500 Skew	161	Bearish	Neutral
CNN Fear & Greed Index	Greed	Bearish	Neutral
Nifty MMI Index	Greed	Neutral	Bearish
20 DMA, S & P 500	5616, Above	Bullish	Neutral
50 DMA, S & P 500	5530, Above	Bullish	Neutral
200 DMA, S & P 500	5229, Above	Bullish	Neutral
20 DMA, Nifty	25453, Above	Neutral	Bullish
50 DMA, Nifty	24955, Above	Neutral	Bullish
200 DMA, Nifty	23029, Above	Neutral	Bullish
S & P 500 P/E	29.94	Bearish	Neutral
Nifty P/E	24.34	Neutral	Bearish
India Vix	11.96, -6.47%	Neutral	Bullish
Dollar/Rupee	83.72, 0.29%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	11	11
Bearish Indications	6	4
Outlook	Bullish	Bullish
Observation	The S&P and the Nifty rose last week. Indicators are bullish for the week. Markets are back at resistance. Watch those stops.
On the Horizon	US – Employment data, UK – GDP, Eurozone – 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 rose last week. Indicators are bullish for the week. Markets are back at resistance. We are transitioning from an inflationary regime to a deflationary one. The sentiment is in greed mode, and risk-reward is poor at these levels. Carry trade liquidation may resume as we enter a seasonally weak period. The Nifty is back at new highs and will likely underperform.

The past week saw US equity markets rise. Most emerging markets rose even as interest rates remained stable. Transports rose. The Baltic dry index rose. The dollar was unchanged. Commodities rose. Valuations are expensive, market breadth rose, and the sentiment is bullish. This week, fear (S&P 500) rose post the FED Pivot.

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 steepened after inverting significantly, reflecting a major economic slowdown. 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 5750 (up) and 5725 (down) on the S&P 500 and 26250 (up) and 26100 (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 eight 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.