Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning September 01

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	6460, -0.10%	Neutral	Neutral
Nifty	24427, -1.78%	Neutral **	Bearish
China Shanghai Index	3858, 0.84%	Bullish	Bullish
Gold	3531, 3.39%	Bullish	Bullish
WTIC Crude	64.01, 0.41%	Neutral	Neutral
Copper	4.61, 1.64%	Bullish	Bullish
CRB Index	302, 0.78%	Bullish	Bullish
Baltic Dry Index	2025, 4.17%	Bullish	Bullish
Euro	1.1686, -0.19%	Neutral	Neutral
Dollar/Yen	147.05, -0.15%	Neutral	Neutral
Dow Transports	15905, -1.22%	Bearish	Bearish
Corporate Bonds (ETF)	109.80, -0.36%	Neutral	Neutral
High-Yield Bonds (ETF)	97.51, 0.08%	Neutral	Neutral
US 10-year Bond Yield	4.23%, -0.75%	Bullish	Bullish
NYSE Summation Index	566, 5%	Bullish	Neutral
US Vix	15.36, 8.02%	Bearish	Neutral
S&P 500 Skew	152	Bearish	Neutral
CNN Fear & Greed Index	Greed	Bearish	Neutral
Nifty MMI Index	Fear	Neutral	Bullish
20 DMA, S&P 500	6418, Above	Bullish	Neutral
50 DMA, S&P 500	6316, Above	Bullish	Neutral
200 DMA, S&P 500	5960, Above	Bullish	Neutral
20 DMA, Nifty	24702, Below	Neutral	Bearish
50 DMA, Nifty	24999, Below	Neutral	Bearish
200 DMA, Nifty	24075, Above	Neutral	Bullish
S&P 500 P/E	29.96	Bearish	Neutral
Nifty P/E	21.46	Neutral	Bearish
India Vix	11.75, 0.21%	Neutral	Neutral
Dollar/Rupee	88.17, 0.97%	Neutral	Bearish
Overall	S&P 500	Nifty
Bullish Indications	10	8
Bearish Indications	5	6
Outlook	Bullish	Bullish
Observation	The S&P was unchanged, and the Nifty fell last week. Indicators are bullish for the week. Markets are topping again. Watch those stops.
On the Horizon	Eurozone – CPI, 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 was unchanged, and the Nifty fell last week. Indicators are bullish for the week. Markets are topping. We are transitioning into a deflationary regime. The sentiment is greedy. Carry trade liquidation is about to resume, and the S&P will likely find resistance soon, as we enter bearish seasonality till the end of October. The macro-environment was rapidly deteriorating even before the recent tariff issue. The recent massive breakdown in transports (subsequent non-conformation for a possible second time) is quite ominous. This, combined with the oil's free fall, has profound recessionary implications. The Nifty has corrected significantly from recent highs and will likely underperform going forward.

The past week saw US equity markets unchanged. Most emerging markets fell even as interest rates fell. Transports fell. The Baltic Dry Index rose. The dollar was unchanged. Commodities rose. Valuations are expensive, market breadth improved, and the sentiment is greedy. Volatility (S&P 500) rose.

A currency crisis should resume at any moment and push risky assets to new lows. Deflation is in the air, and bonds are telegraphing just that despite intermittent spikes in yields. 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 is at major lows, while commodities and bond yields are flashing significant warning signs.

Global yield curves are steepening after having inverted a second time, reflecting the arrival of a significant economic slowdown. This 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 6475 (up) and 6445 (down) on the S&P 500 and 24500 (up) and 24350 (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 (currently correcting). 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.