About

Ahead of the Curve provides analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity, and FOREX markets are discussed. Rajveer Rawlin is a PhD and received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher, having followed capital markets in the US and India since 1993. His research interests include capital markets, banking, investment analysis, and portfolio management, and he has over 20 years of experience in the above areas, covering the US and Indian markets. He has several publications in the above areas. He currently teaches business and management students at CHRIST University. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Monday, 21 March 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning March 21

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

4463, 6.16%

Bullish

Bullish

Nifty

17287, 3.95%

Neutral **

Bullish

China Shanghai Index

3251, -1.77%

Bearish

Bearish

Gold

1922, -3.20%

Bearish

Bearish

WTIC Crude

104.99, -3.97%

Bearish

Bearish

Copper

4.72, 2.00%

Bullish

Bullish

Baltic Dry Index

2605, -4.16%

Bearish

Bearish

Euro

1.1051, 1.30%

Bullish

Bullish

Dollar/Yen

119.14, 1.59%

Bullish

Bullish

Dow Transports

16498, 8.30%

Bullish

Bullish

Corporate Bonds (ETF)

121.81, 1.36%

Bullish

Bullish

High Yield Bonds (ETF)

102.70, 1.94%

Bullish

Bullish

US 10-year Bond Yield

2.15%, 5.59%

Bearish

Bearish

NYSE Summation Index

-598, 16.5%

Bullish

Neutral

US Vix

23.87, -22.37%

Bullish

Bullish

Skew

137

Neutral

Neutral

20 DMA, S & P 500

4305, Above

Bullish

Neutral

50 DMA, S & P 500

4433, Above

Bullish

Neutral

200 DMA, S & P 500

4471, Below

Bearish

Neutral

20 DMA, Nifty

16712, Above

Neutral

Bullish

50 DMA, Nifty

17262, Above

Neutral

Bullish

200 DMA, Nifty

16986, Above

Neutral

Bullish

S & P 500 P/E

25.45

Bearish

Neutral

Nifty P/E

22.23

Neutral

Bearish

India Vix

22.61, -10.79%

Neutral

Bullish

Dollar/Rupee

75.97, -0.67%

Neutral

Bullish

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

11

14

Bearish Indications

7

6

Outlook

Bullish

Bullish

Observation

The S and P and the Nifty rallied last week. Indicators are bullish for the week.

The markets are correcting. Watch those stops.

On the Horizon

UK – CPI, China – PboC rate decision

*Nifty

India’s Benchmark Stock Market Index

Raw Data

Courtesy Stock charts, investing.com, multpl.com, NSE

**Neutral

Changes less than 0.5% are considered neutral

 


The S and P and the Nifty were up last week. Indicators are bullish for the week. Deflation is in the air despite the recent inflationary spike. Feels like a 2000 style recession trade has begun. The recent rebound will likely run into resistance. (My views don’t matter, kindly pay attention to the levels). The S&P 500 closed below the 200 DMA recently, after spending a very long time above it. Monthly MACD’s on most global markets have gone negative after a long time. This spells trouble ahead and opens up a significant downside ahead.

We got a bounce that reached the 200 DMA without capitulation. This suggests the lows may not be in. Markets have been making new highs amid loads of divergences and risky assets are breaking to the downside. Earnings revisions have been average, but any significant upward revisions appear unlikely. Typical late-cycle FED put stuff has led to a taper tantrum following the recent taper announcement from the FED and a likely topTail risk has skyrocketed recently. The market is about to begin an epic correction. Deflationary busts often begin after inflationary scares (the market is calling the Fed’s bluff) and long bonds are telegraphing just that. 

While tail risk has abated a bit and the transports are leading, The Dollar, market breadth, corporate bonds, and high yield bonds, are still flashing major warning signs. The epic correction signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up, suggesting a major top may be in. The moment of reckoning is very near.  Technicals are tracking fundamentals and have turned bearish. The market is yet to price in one of the worst earnings decline periods in stock market history. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 4000 area is emerging on the S and P, and 15000 should arrive on the Nifty in the next few months. The FED is repeating the Japan experiment and the 3 lost decades in Japan (1989-2019) are set to repeat across the globe.

The recent global virus epidemic (black swan) has dented global GDP significantly and will usher in a depression much faster than most think. The trend is changing from bullish to bearish and the markets are about to get smashed by a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros.

Tail risk has been very high of late, as yield curves are about to invert yet again reflecting a major recession. The critical levels to watch for the week are 4475 (up) and 4450 (down) on the S & P 500 and 17350 (up) and 17200 (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 is getting torched as expected. Gold is increasingly looking like the asset class to own in the upcoming decade. You can check out last week’s report for a comparison. Love your thoughts and feedback.

 

 

Monday, 14 March 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning March 14

 

Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

4204, -2.88%

Bearish

Bearish

Nifty

16631, 2.37%

Neutral **

Bullish

China Shanghai Index

3310, -0.11%

Bearish

Bearish

Gold

1992, 1.30%

Bullish

Bullish

WTIC Crude

109.20, -5.60%

Bearish

Bearish

Copper

4.61, -6.63%

Bearish

Bearish

Baltic Dry Index

2718, 26.54%

Bullish

Bullish

Euro

1.0912, -0.13%

Neutral

Neutral

Dollar/Yen

117.29, 2.19%

Bullish

Bullish

Dow Transports

15233, -1.04%

Bearish

Bearish

Corporate Bonds (ETF)

120.18, -2.80%

Bearish

Bearish

High Yield Bonds (ETF)

100.75, -2.02%

Bearish

Bearish

US 10-year Bond Yield

1.99%, 18.65%

Bearish

Bearish

NYSE Summation Index

-716, -5.3%

Bearish

Neutral

US Vix

30.75, -3.85%

Bullish

Bullish

Skew

131

Neutral

Neutral

20 DMA, S & P 500

4329, Below

Bearish

Neutral

50 DMA, S & P 500

4476, Below

Bearish

Neutral

200 DMA, S & P 500

4467, Below

Bearish

Neutral

20 DMA, Nifty

16767, Below

Neutral

Bearish

50 DMA, Nifty

17306, Below

Neutral

Bearish

200 DMA, Nifty

16953, Below

Neutral

Bearish

S & P 500 P/E

23.97

Bearish

Neutral

Nifty P/E

21.38

Neutral

Bearish

India Vix

25.35, -9.34%

Neutral

Bullish

Dollar/Rupee

76.76, 0.46%

Neutral

Neutral

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

4

6

Bearish Indications

13

12

Outlook

Bearish

Bearish

Observation

The S and P fell and the Nifty rebounded last week. Indicators are bearish for the week.

The markets are correcting. Watch those stops.

On the Horizon

US - PPI, FOMC rate decision, Eurozone – CPI, UK – Employment data, BOE rate decision, Japan - BOJ rate decision

*Nifty

India’s Benchmark Stock Market Index

Raw Data

Courtesy Stock charts, investing.com, multpl.com, NSE

**Neutral

Changes less than 0.5% are considered neutral

 


The S and P fell and the Nifty was up last week. Indicators are bearish for the week. Deflation is in the air despite the recent inflationary spike. Feels like a 2000 style recession trade has begun (My views don’t matter, kindly pay attention to the levels). The S&P 500 closed below the 200 DMA recently, after spending a very long time above it. Monthly MACD’s on most global markets have gone negative after a long time. This spells trouble ahead and opens up a significant downside ahead. We need a capitulation bottom before we can get a bounce that reaches the 200 DMA. In the short run credit risk from Russian defaults may trump the FED. Markets have been making new highs amid loads of divergences and risky assets are breaking to the downside. Earnings revisions have been average, but any significant upward revisions appear unlikely. Typical late-cycle FED put stuff has led to a taper tantrum following the recent taper announcement from the FED and a likely topTail risk has skyrocketed with the Skew/Vix ratio recently touching double digits. The market is about to begin an epic correction. Deflationary busts often begin after inflationary scares (the market is calling the Fed’s bluff) and long bonds are telegraphing just that. 

While tail risk has abated a bit, The Dollar, market breadth, corporate bonds, and high yield bonds, are still flashing major warning signs. The epic correction signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up, suggesting a major top may be in. The moment of reckoning is very near.  Technicals are tracking fundamentals and have turned bearish. The market is yet to price in one of the worst earnings decline periods in stock market history. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 120% in our most recent rally of the lows in the last 2-year period. After extreme euphoria for the indices, a highly probable selloff to the 4000 area is emerging on the S and P, and 15000 should arrive on the Nifty in the next few months. The FED is repeating the Japan experiment and the 3 lost decades in Japan (1989-2019) are set to repeat across the globe. SPX 1800 and lower in a year and we stay there till 2030, scary? The markets are very close to an epic meltdown and the SPX is headed way lower.

The markets are overvalued, overbought and out of touch with economic realities. Long term, the epic meltdown is set to continue resulting in a 5 year plus bear market with lot lower levels that may be as low as 800 on the S and P. QE forever from the FED is pausing and about to trigger the deflationary collapse of the century as we make a major top in global equity markets. The market is looking like the short of a lifetime with topping action in the transports, other global indices, and commodities. High valuations continue.

The recent global virus epidemic (black swan) has dented global GDP significantly and will usher in a depression much faster than most think. The trend is about to change from bullish to bearish and the markets are about to get smashed by a strong dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. A 5-year deflationary wave has started in key asset classes like the Euro, stocks, and commodities amidst several bearish divergences and overstretched valuations.

We are entering a multi-year great depression. The markets are still trading well over 3 standard deviations above their long-term averages from which corrections usually result. Tail risk has been very high of late, as interest rates are about to plunge yet again reflecting a major recession. The critical levels to watch for the week are 4215 (up) and 4190 (down) on the S & P 500 and 16700 (up) and 16550 (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 is getting torched as expected. Gold is increasingly looking like the asset class to own in the upcoming decade. You can check out last week’s report for a comparison. Love your thoughts and feedback.

 

 

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.