Indicator |
Weekly Level / Change |
Implication for S & P 500 |
Implication for Nifty* |
S & P 500 |
3825, - 2.21% |
Bearish |
Bearish |
Nifty |
15752, 0.34% |
Neutral ** |
Neutral |
China Shanghai Index |
3388, 1.13% |
Bullish |
Bullish |
Gold |
1813, - 0.95% |
Bearish |
Bearish |
WTIC Crude |
108.46, 0.78% |
Bullish |
Bullish |
Copper |
3.61, - 3.39% |
Bearish |
Bearish |
Baltic Dry Index |
2214, - 5.02% |
Bearish |
Bearish |
Euro |
1.0429, - 1.20% |
Bearish |
Bearish |
Dollar/Yen |
135.21, 0.02% |
Neutral |
Neutral |
Dow Transports |
13289, - 1.91% |
Bearish |
Bearish |
Corporate Bonds (ETF) |
111.12, 0.94% |
Bullish |
Bullish |
High Yield Bonds (ETF) |
91.04, - 1.74% |
Bearish |
Bearish |
US 10-year Bond Yield |
2.89%, - 7.81% |
Bullish |
Bullish |
NYSE Summation Index |
-467, 13% |
Bullish |
Neutral |
US Vix |
26.70, - 1.95% |
Bullish |
Bullish |
Skew |
119 |
Neutral |
Neutral |
CNN Fear & Greed |
Extreme Fear |
Bullish |
Bullish |
20 DMA, S & P 500 |
3871, Below |
Bearish |
Neutral |
50 DMA, S & P 500 |
4006, Below |
Bearish |
Neutral |
200 DMA, S & P 500 |
4390, Below |
Bearish |
Neutral |
20 DMA, Nifty |
15827, Below |
Neutral |
Bearish |
50 DMA, Nifty |
16214, Below |
Neutral |
Bearish |
200 DMA, Nifty |
17157, Below |
Neutral |
Bearish |
S & P 500 P/E |
19.33 |
Bearish |
Neutral |
Nifty P/E |
19.46 |
Neutral |
Bearish |
India Vix |
21.25, 3.41% |
Neutral |
Bearish |
Dollar/Rupee |
78.95, 0.92% |
Neutral |
Bearish |
Overall |
S & P 500 |
Nifty |
|
Bullish Indications |
7 |
6 |
|
Bearish Indications |
11 |
12 |
|
Outlook |
Bearish |
Bearish |
|
Observation |
The S and P fell and the Nifty was
unchanged last week. Indicators are bearish for the week. The markets are correcting. Watch those stops. |
||
On the Horizon |
Eurozone – ECB decision minutes, US – FOMC decision minutes,
employment data |
||
*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 unchanged last week. Indicators are bearish for
the week. Deflation is in the air despite the recent
inflationary spike and the Chinese Yuan, government bonds, and
commodities are telegraphing just that. Feels like a 2000-style
recession trade has begun, with a decline in risk assets
across the board. (My views don’t matter, kindly pay attention to the levels).
The S&P 500 is well below the 200 DMA, after spending a very long
time above it, and its 200 DMA is declining. Monthly MACDs on
most global markets have gone negative after a long time. This
spells trouble and opens up significant downside risk ahead. The market
is near new lows for the year.
We have got
bounces without capitulation. This suggests the lows may not be in
and the regime is changing from buying the dip to selling the rip. We
may get a final flush down soon. Risky assets are
breaking to the downside across the board. Downward earnings revisions are
likely soon.
The Fed is aggressively
tightening into a recession. Tail risk while moderating is
still high. Deflationary busts often begin after major inflationary
scares. The market has corrected significantly and more is left on the
downside.
The transports
are leading the next decline. The Dollar, market breadth, and bond yields are continuing
to flash major warning signs despite the recent counter-trend move.
The epic correction signal occurred with retail, hedge funds, and speculators
all in, in the recent melt-up in January, suggesting a major top is
in. The moment of reckoning is here. 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 Depression (the 1930s) 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 3500 area
is emerging on the S and P, and 14000 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 trend has changed from bullish to
bearish and the markets are getting a reality check and getting smashed by rising
rates and a strong dollar. Looking for significant underperformance
in the Nifty going forward on rapidly deteriorating macros. Yield curves
are about to invert yet again reflecting a major upcoming recession.
The critical
levels to watch for the week are 3840 (up) and 3815 (down) on
the S & P 500 and 15850 (up) and 15650 (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 yet again and will likely prove to be a sell on every
rise. Gold is increasingly looking like the asset class to own
in the upcoming decade despite the recent selloff. You can check
out last week’s
report for a comparison. Love your thoughts and feedback.