Market Signals for the US stock market S and P 500 Index and the Indian Stock Market Nifty Index for the Week beginning March 16

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	6632, -1.60%	Bearish	Bearish
Nifty	23151, -5.31%	Neutral **	Bearish
China Shanghai Index	4096, -1.88%	Bearish	Bearish
Gold	5062, -1.70%	Bearish	Bearish
WTIC Crude	98.71, 8.59%	Bullish	Bullish
Copper	5.76, -0.86%	Bearish	Bearish
CRB Index	366, 13.67%	Bullish	Bullish
Baltic Dry Index	2028, 0.90%	Bullish	Bullish
Euro	1.1416, -1.74%	Bearish	Bearish
Dollar/Yen	159.73, 1.22%	Bullish	Bullish
Dow Transports	17732, -3.95%	Bearish	Neutral
Corporate Bonds (ETF)	108.17, -1.81%	Bearish	Bearish
High-Yield Bonds (ETF)	95.25, -0.69%	Bearish	Bearish
US 10-year Bond Yield	4.29%, 3.70%	Bearish	Bearish
NYSE Summation Index	165, -69.00%	Bearish	Neutral
US Vix	27.19, -7.80%	Bullish	Neutral
S&P 500 Skew	138	Neutral	Neutral
CNN Fear & Greed Index	Extreme Fear	Bullish	Neutral
Nifty MMI Index	Extreme Fear	Neutral	Bullish
20 DMA, S&P 500	6830, Below	Bearish	Neutral
50 DMA, S&P 500	6884, Below	Bearish	Neutral
200 DMA, S&P 500	6604, Above	Bullish	Neutral
20 DMA, Nifty	24926, Below	Neutral	Bearish
50 DMA, Nifty	25384, Below	Neutral	Bearish
200 DMA, Nifty	25312, Below	Neutral	Bearish
S&P 500 P/E	28.50	Bearish	Neutral
Nifty P/E	20.26	Neutral	Bearish
India Vix	22.65, 13.91%	Neutral	Bearish
Dollar/Rupee	92.54, 0.66%	Neutral	Bearish
Overall	S&P 500	Nifty
Bullish Indications	7	5
Bearish Indications	13	15
Outlook	Bearish	Bearish
Observation	The S&P and the Nifty fell last week. Indicators are bearish for the week. Markets are collapsing. Watch those stops.
On the Horizon	UK – BOE rate decision, Eurozone – CPI, ECB rate decision, US – PPI, FOMC rate decision, China – PBOC rate decision
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Data courtesy stockcharts.com, investing.com, multpl.com, nseindia.com, tickertape.in, forexfactory.com
**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 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 on any bounces. The macroenvironment was already deteriorating rapidly even before the ongoing Middle East war. The massive AI bubble is about to burst. This has profound recessionary implications. The Nifty has corrected and is likely to underperform in the near term.

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

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 6645 (up) and 6620 (down) on the S&P 500 and 23250 (up) and 23050 (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 (currently 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.