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.

Monday, 11 April 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 11

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	4488, -1.27%	Bearish	Bearish
Nifty	17784, 0.64%	Neutral **	Bullish
China Shanghai Index	3252, - 0.94%	Bearish	Bearish
Gold	1948, 1.53%	Bullish	Bullish
WTIC Crude	97.84, -1.44%	Bearish	Bearish
Copper	4.73, 0.84%	Bullish	Bullish
Baltic Dry Index	2055, -12.81%	Bearish	Bearish
Euro	1.0878, - 1.58%	Bearish	Bearish
Dollar/Yen	124.33, 1.50%	Bullish	Bullish
Dow Transports	14471, -6.71%	Bearish	Bearish
Corporate Bonds (ETF)	117.20, - 3.21%	Bearish	Bearish
High Yield Bonds (ETF)	99.98, - 2.12%	Bearish	Bearish
US 10-year Bond Yield	2.70%, 12.64%	Bearish	Bearish
NYSE Summation Index	-112, 3.7%	Bullish	Neutral
US Vix	21.16, 7.79%	Bearish	Bearish
Skew	142	Bearish	Bearish
20 DMA, S & P 500	4481, Above	Bullish	Neutral
50 DMA, S & P 500	4427, Above	Bullish	Neutral
200 DMA, S & P 500	4493, Below	Bearish	Neutral
20 DMA, Nifty	17345, Above	Neutral	Bullish
50 DMA, Nifty	17143, Above	Neutral	Bullish
200 DMA, Nifty	17120, Above	Neutral	Bullish
S & P 500 P/E	25.59	Bearish	Neutral
Nifty P/E	23.34	Neutral	Bearish
India Vix	17.69, - 4.05%	Neutral	Bullish
Dollar/Rupee	75.92, - 0.07%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	6	7
Bearish Indications	13	12
Outlook	Bearish	Bearish
Observation	The S and P fell and the Nifty rallied last week. Indicators are bearish for the week. The markets are correcting. Watch those stops.
On the Horizon	US – CPI, PPI, Eurozone - ECB rate decision, UK – GDP, Employment data, CPI

*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 rallied 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. 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 and opens up a significant downside risk ahead. We could get a reality check in the markets this week, with some significant downside in the weeks to come.

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 top. Tail 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.

The transports led the most recent rebound and are starting to lead the next decline, The Dollar, tail risk, market breadth, and bond yields, are continuing to flash 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 recently turned bearish. 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.

Tail risk has been very high of late, as yield curves are about to invert yet again reflecting a major upcoming recession. The critical levels to watch for the week are 4500 (up) and 4475 (down) on the S & P 500 and 17850 (up) and 17700 (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 about to get torched yet again. 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, 4 April 2022

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning April 04

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	4546, 0.06%	Neutral	Neutral
Nifty	17671, 3.02%	Neutral **	Bullish
China Shanghai Index	3283, 2.19%	Bullish	Bullish
Gold	1924, -1.56%	Bearish	Bearish
WTIC Crude	99.38, -12.75%	Bearish	Bearish
Copper	4.71, 0.19%	Neutral	Neutral
Baltic Dry Index	2357, -7.35%	Bearish	Bearish
Euro	1.1041, 0.55%	Bullish	Bullish
Dollar/Yen	122.54, 0.39%	Neutral	Neutral
Dow Transports	15511, -5.34%	Bearish	Bearish
Corporate Bonds (ETF)	119.27, 1.53%	Bullish	Bullish
High Yield Bonds (ETF)	102.15, 0.81%	Bullish	Bullish
US 10-year Bond Yield	2.39%, -3.33%	Bullish	Bullish
NYSE Summation Index	-116, 67%	Bullish	Neutral
US Vix	19.63, -5.67%	Bullish	Bullish
Skew	146	Bearish	Bearish
20 DMA, S & P 500	4408, Above	Bullish	Neutral
50 DMA, S & P 500	4412, Above	Bullish	Neutral
200 DMA, S & P 500	4486, Above	Bullish	Neutral
20 DMA, Nifty	16936, Above	Neutral	Bullish
50 DMA, Nifty	17113, Above	Neutral	Bullish
200 DMA, Nifty	17068, Above	Neutral	Bullish
S & P 500 P/E	25.92	Bearish	Neutral
Nifty P/E	23.19	Neutral	Bearish
India Vix	18.44, -21.32%	Neutral	Bullish
Dollar/Rupee	75.95, -0.43%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	10	11
Bearish Indications	6	6
Outlook	Bullish	Bullish
Observation	The S and P was unchanged and the Nifty rallied last week. Indicators are bullish for the week. The markets are correcting. Watch those stops.
On the Horizon	US – FOMC rate decision minutes, Eurozone - ECB rate decision minutes, India – RBI 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 was unchanged and the Nifty rallied 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 could get a reality check in the markets this week.

The transports led the recent rebound and are likely now about to lead a market decline. The Dollar, tail risk, market breadth, and bond yields, 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 recently turned bearish. With extremely high valuations, a crash is on the menu. Extremely low volatility suggests complacency and downside ahead.

The trend is about to change from bullish to bearish and the markets are about to get a reality check and 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 upcoming recession.

The critical levels to watch for the week are 4560 (up) and 4535 (down) on the S & P 500 and 17750 (up) and 17600 (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 about to get torched yet again. 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.

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.