Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 07

 

Asset Class	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	5074, -9.08%	Bearish	Bearish
Nifty	22905, -2.61%	Neutral **	Bearish
China Shanghai Index	3342, -0.28%	Neutral	Neutral
Gold	3035, -2.53%	Bearish	Bearish
WTIC Crude	61.99, -10.63%	Bearish	Bearish
Copper	4.40, -14.19%	Bearish	Bearish
CRB Index	289, -6.00%	Bearish	Bearish
Baltic Dry Index	1489, -7.05%	Bearish	Bearish
Euro	1.0955, 1.18%	Bullish	Bullish
Dollar/Yen	146.90, -1.94%	Bearish	Bearish
Dow Transports	13160, -9.82%	Bearish	Neutral
Corporate Bonds (ETF)	108.78, 0.28%	Neutral	Neutral
High Yield Bonds (ETF)	92.45, -2.90%	Bearish	Bearish
US 10-year Bond Yield	4.00%, -5.93%	Bullish	Bullish
NYSE Summation Index	-296, -52%	Bearish	Neutral
US Vix	45.31, 109.28%	Bearish	Neutral
S & P 500 Skew	137	Neutral	Neutral
CNN Fear & Greed Index	Extreme Fear	Bullish	Neutral
Nifty MMI Index	Greed	Neutral	Bearish
20 DMA, S & P 500	5608, Below	Bearish	Neutral
50 DMA, S & P 500	5844, Below	Bearish	Neutral
200 DMA, S & P 500	5760, Below	Bearish	Neutral
20 DMA, Nifty	23015, Below	Neutral	Bearish
50 DMA, Nifty	22995, Below	Neutral	Bearish
200 DMA, Nifty	24073, Below	Neutral	Bearish
S & P 500 P/E	25.19	Bearish	Neutral
Nifty P/E	20.82	Neutral	Bearish
India Vix	13.76, 8.16%	Neutral	Bearish
Dollar/Rupee	85.50, -0.04%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	3	2
Bearish Indications	15	15
Outlook	Bearish	Bearish
Observation	The S&P and the Nifty fell last week. Indicators are bearish for the week. Markets are crashing. Watch those stops.
On the Horizon	US – CPI, PPI, Eurozone – German CPI, UK – GDP, India – RBI 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 and the Nifty fell last week. Indicators are bearish for the week. Markets have topped, and the bottom of this leg will likely come near 4800. We are transitioning into a deflationary regime. The sentiment is extremely fearful. Carry trade liquidation has resumed as the S & P is below the 200 DMA near 5760 and in freefall. The macro-environment was rapidly deteriorating even before these latest rounds of tariffs. The massive breakdown in transports is quite ominous, with profound recessionary implications. The Nifty has corrected significantly from recent highs and will likely underperform.

The past week saw US equity markets in freefall. Most emerging markets fell even as interest rates fell. Transports collapsed. The Baltic dry index fell. The dollar fell. Commodities fell. Valuations are expensive, market breadth fell, and the sentiment is fearful. Fear (S&P 500) skyrocketed.

A currency crisis should resume and push risky assets to new lows. Deflation is in the air, and bonds are telegraphing just that. It 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 rally is a likely catalyst.

The S&P 500 is correcting from recent 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 falters. The Fed has aggressively tightened into a recession. Deflationary busts often begin after major inflationary scares. The Dollar, commodities, and bond yields are flashing significant warning signs.

Global yield curves have inverted a second time after the recent steepening, reflecting the arrival of a significant economic slowdown. This inversion following the recent steepening of the yield curve, after the first inversion, 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 5085 (up) and 5060 (down) on the S&P 500 and 23000 (up) and 22800 (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 is a sell on every rise. Gold increasingly looks like the asset class to own over the next decade (short-term resistance at 3200). Gold exploded almost eight times higher over the decade following the dot-com bust in 2000. Imagine what would happen to gold as this AI bubble bursts. You can check out last week’s report for a comparison. I love your thoughts and feedback.