Market Signals for the US stock market S and P 500 Index and the Indian Stock Market Nifty Index for the Week beginning April 06

 

Asset Class	Weekly Level / Change	Implications for S&P 500	Implications for Nifty*
S&P 500	6583, 3.36%	Bullish	Bullish
Nifty	22713, -0.47%	Neutral **	Neutral
China Shanghai Index	3880, -0.86%	Bearish	Bearish
Gold	4703, 4.31%	Bullish	Bullish
WTIC Crude	112.06, 12.46%	Bullish	Bullish
Copper	5.68, 3.90%	Bullish	Bullish
CRB Index	381, 3.28%	Bullish	Bullish
Baltic Dry Index	2066, 1.72%	Bullish	Bullish
Euro	1.1517, 0.23%	Neutral	Neutral
Dollar/Yen	159.59, -0.41%	Neutral	Neutral
Dow Transports	19089, 5.03%	Bullish	Neutral
Corporate Bonds (ETF)	109.12, 1.39%	Bullish	Bullish
High-Yield Bonds (ETF)	95.72, 1.12%	Bullish	Bullish
US 10-year Bond Yield	4.35%, -2.14%	Bullish	Bullish
NYSE Summation Index	-292, -17.00%	Bearish	Neutral
US Vix	23.87, -23.12%	Bullish	Neutral
S&P 500 Skew	147	Bearish	Neutral
CNN Fear & Greed Index	Extreme Fear	Bullish	Neutral
Nifty MMI Index	Extreme Fear	Neutral	Bullish
20 DMA, S&P 500	6608, Below	Bearish	Neutral
50 DMA, S&P 500	6784, Below	Bearish	Neutral
200 DMA, S&P 500	6645, Below	Bearish	Neutral
20 DMA, Nifty	23440, Below	Neutral	Bearish
50 DMA, Nifty	24675, Below	Neutral	Bearish
200 DMA, Nifty	25203, Below	Neutral	Bearish
S&P 500 P/E	28.21	Bearish	Neutral
Nifty P/E	19.96	Neutral	Bearish
India Vix	25.52, -4.79%	Neutral	Bullish
Dollar/Rupee	92.71, -2.19%	Neutral	Bullish
Overall	S&P 500	Nifty
Bullish Indications	12	12
Bearish Indications	7	13
Outlook	Bullish	Bullish
Observation	The S&P rose, and the Nifty fell last week. Indicators are bullish for the week. Markets are collapsing. Watch those stops.
On the Horizon	India – RBI rate decision, US – Middle East war, CPI
*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 rose, and the Nifty fell last week. Indicators are bullish for the week. Markets have topped and are about to collapse. We are oversold, and the bounce may continue following positive divergences in transports and bond ETFs. 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 rise. Most emerging markets rose as interest rates fell. Transports rose. The Baltic Dry Index rose. The dollar was unchanged. 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 6595 (up) and 6570 (down) on the S&P 500 and 22800 (up) and 22650 (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.