Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning November 03

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	6840, 0.71%	Bullish	Bullish
Nifty	25722, -0.28%	Neutral **	Neutral
China Shanghai Index	3955, 0.11%	Neutral	Neutral
Gold	4013, -1.60%	Bearish	Bearish
WTIC Crude	60.98, -1.01%	Bearish	Bearish
Copper	5.11, 0.03%	Neutral	Neutral
CRB Index	303, -0.14%	Neutral	Neutral
Baltic Dry Index	1966, -1.26%	Bearish	Bearish
Euro	1.1536, -0.82%	Bearish	Bearish
Dollar/Yen	154.01, 0.61%	Bullish	Bullish
Dow Transports	15890, 2.82%	Bullish	Neutral
Corporate Bonds (ETF)	111.23, -1.32%	Bearish	Bearish
High-Yield Bonds (ETF)	97.39, -0.36%	Neutral	Neutral
US 10-year Bond Yield	4.10%, 2.60%	Bearish	Bearish
NYSE Summation Index	201, -9.00%	Bearish	Neutral
US Vix	17.44, 6.54%	Bearish	Neutral
S&P 500 Skew	143	Bearish	Neutral
CNN Fear & Greed Index	Fear	Bullish	Neutral
Nifty MMI Index	Greed	Neutral	Bearish
20 DMA, S&P 500	6739, Above	Bullish	Neutral
50 DMA, S&P 500	6640, Above	Bullish	Neutral
200 DMA, S&P 500	6112, Above	Bullish	Neutral
20 DMA, Nifty	25475, Above	Neutral	Bullish
50 DMA, Nifty	25135, Above	Neutral	Bullish
200 DMA, Nifty	24315, Above	Neutral	Bullish
S&P 500 P/E	31.73	Bearish	Neutral
Nifty P/E	22.64	Neutral	Bearish
India Vix	12.15, 4.85%	Neutral	Bearish
Dollar/Rupee	88.79, 1.06%	Neutral	Bearish
Overall	S&P 500	Nifty
Bullish Indications	7	5
Bearish Indications	10	10
Outlook	Bearish	Bearish
Observation	The S&P rose, and the Nifty was unchanged last week. Indicators are bearish for the week. Markets are topping. Watch those stops.
On the Horizon	UK – BOE rate decision, US – ADP 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 rose, and the Nifty was unchanged last week. Indicators are bearish for the week. Markets are topping and about to collapse. We are transitioning into a deflationary regime, and the risk of a recession has increased significantly. The sentiment is fearful. Carry trade liquidation is about to resume, and the S&P will likely find resistance soon. The macroenvironment was already deteriorating rapidly even before the recent tariff issue. The recent massive breakdown in transports (subsequent non-conformation for a possible second time) is quite ominous. Divergences galore. This, combined with oil's recent free fall, has profound recessionary implications. The Nifty has corrected significantly from its recent highs and is likely to underperform in the near future.

The past week saw US equity markets rise. Most emerging markets were unchanged as interest rates rose. Transports rose. The Baltic Dry Index fell. The dollar rose. Commodities were little changed. Valuations are expensive, market breadth fell, and sentiment is fearful. Volatility (S&P 500) rebounded.

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 closely tracking the 2000 moves down in the S&P 500, implying a panic low is 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 are likely to continue breaking to the downside as earnings growth falters. The Fed is now easing, anticipating 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 are likely to underperform in the future under such conditions. 

The critical levels to watch for the week are 6850 (up) and 6830 (down) on the S&P 500 and 25800 (up) and 25650 (down) on the Nifty. A significant breach of the above levels could trigger the next major move in these 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 (has gone parabolic of late and correcting). Gold exploded almost eight times higher over the decade following the dot-com bust in 2000. Imagine what would happen to gold when this AI bubble bursts. You can check out last week’s report for a comparison. I love your thoughts and feedback.