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

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	6932, -0.10%	Neutral	Neutral
Nifty	24694, 3.50%	Neutral **	Bullish
China Shanghai Index	4066, -1.27%	Bearish	Bearish
Gold	4980, 4.95%	Bullish	Bullish
WTIC Crude	63.55, -2.55%	Bearish	Bearish
Copper	5.88, -0.71%	Bearish	Bearish
CRB Index	310, -3.31%	Bearish	Bearish
Baltic Dry Index	1923, -10.47%	Bearish	Bearish
Euro	1.1817, -0.28%	Neutral	Neutral
Dollar/Yen	157.21, 1.58%	Bullish	Bullish
Dow Transports	19892, 8.70%	Bullish	Neutral
Corporate Bonds (ETF)	110.56, -0.01%	Neutral	Neutral
High-Yield Bonds (ETF)	97.40, -0.43%	Neutral	Neutral
US 10-year Bond Yield	4.21%, -0.83%	Bullish	Bullish
NYSE Summation Index	575, -1.00%	Bearish	Neutral
US Vix	17.76, 1.83%	Bearish	Neutral
S&P 500 Skew	140	Bearish	Neutral
CNN Fear & Greed Index	Neutral	Neutral	Neutral
Nifty MMI Index	Fear	Neutral	Bullish
20 DMA, S&P 500	6927, Above	Bullish	Neutral
50 DMA, S&P 500	6886, Above	Bullish	Neutral
200 DMA, S&P 500	6470, Above	Bullish	Neutral
20 DMA, Nifty	25497, Above	Neutral	Bullish
50 DMA, Nifty	25831, Above	Neutral	Bullish
200 DMA, Nifty	25242, Above	Neutral	Bullish
S&P 500 P/E	29.75	Bearish	Neutral
Nifty P/E	22.26	Neutral	Bearish
India Vix	11.94, -20.90%	Neutral	Bullish
Dollar/Rupee	90.60, -1.20%	Neutral	Bullish
Overall	S&P 500	Nifty
Bullish Indications	7	10
Bearish Indications	9	6
Outlook	Bearish	Bullish
Observation	The S&P was unchanged, and the Nifty rose last week. Indicators are mixed for the week. Markets are topping. Watch those stops.
On the Horizon	UK – GDP, US – Employment data, 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 was unchanged, and the Nifty rose last week. Indicators are mixed 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 neutral. 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 massive AI bubble is about to burst. Transports have finally confirmed the high in the industrials, which is bullish in the short term. Divergences galore. This, combined with oil's recent free fall, has profound recessionary implications. The Nifty has corrected from its recent highs and is likely to underperform in the near term.

The past week saw US equity markets unchanged. Most emerging markets were up as interest rates fell. Transports rose significantly higher. The Baltic Dry Index fell. The dollar was unchanged. Commodities fell. Valuations are expensive, market breadth was unchanged, and the sentiment is neutral. 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 closely tracking the 2000 moves down in the S&P 500, suggesting a panic low is right around the corner in the coming 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 as this AI bubble deflates. 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 rebounding from major lows, while commodities and bond yields are flashing significant warning signs.

Global yield curves are steepening after inverting a third time in the last 2 years, 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 6945 (up) and 6920 (down) on the S&P 500 and 25800 (up) and 25600 (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). 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.