|
Asset Class |
Weekly Level / Change |
Implication for S & P 500 |
Implication for Nifty* |
|
S & P 500 |
4309, 0.48% |
Neutral |
Neutral |
|
Nifty |
19654, 0.08% |
Neutral ** |
Neutral |
|
China Shanghai Index |
3111, 0.00% |
Neutral |
Neutral |
|
Gold |
1847, -1.02% |
Bearish |
Bearish |
|
WTIC Crude |
82.81, -8.79% |
Bearish |
Bearish |
|
Copper |
3.63, -2.80% |
Bearish |
Bearish |
|
CRB Index |
277, -2.68% |
Bearish |
Bearish |
|
Baltic Dry Index |
1929, 13.40% |
Bullish |
Bullish |
|
Euro |
1.0588, 0.17% |
Neutral |
Neutral |
|
Dollar/Yen |
149.30, -0.03% |
Neutral |
Neutral |
|
Dow Transports |
14808, -1.08% |
Bearish |
Bearish |
|
Corporate Bonds (ETF) |
99.98, -2.00% |
Bearish |
Bearish |
|
High Yield Bonds (ETF) |
89.04, -1.50% |
Bearish |
Bearish |
|
US 10-year Bond Yield |
4.80%, 4.71% |
Bearish |
Bearish |
|
NYSE Summation Index |
-654, -59% |
Bearish |
Neutral |
|
US Vix |
17.45, -0.40% |
Neutral |
Neutral |
|
Skew |
129 |
Neutral |
Neutral |
|
CNN Fear & Greed Index |
Fear |
Bullish |
Bullish |
|
20 DMA, S & P 500 |
4357, Below |
Bearish |
Neutral |
|
50 DMA, S & P 500 |
4424, Below |
Bearish |
Neutral |
|
200 DMA, S & P 500 |
4208, Above |
Bullish |
Neutral |
|
20 DMA, Nifty |
19787, Below |
Neutral |
Bearish |
|
50 DMA, Nifty |
19607, Above |
Neutral |
Bullish |
|
200 DMA, Nifty |
18518, Above |
Neutral |
Bullish |
|
S & P 500 P/E |
24.60 |
Bearish |
Neutral |
|
Nifty P/E |
22.20 |
Neutral |
Bearish |
|
India Vix |
10.30, -10.06% |
Neutral |
Bullish |
|
Dollar/Rupee |
83.11, -0.09% |
Neutral |
Neutral |
|
Overall |
S & P 500 |
Nifty |
|
|
Bullish Indications |
3 |
5 |
|
|
Bearish Indications |
12 |
9 |
|
|
Outlook |
Bearish |
Bearish |
|
|
Observation |
The S&P 500 and the Nifty were unchanged last week. Indicators are
bearish for the week. Markets are putting in a short-term bottom. Watch those stops. |
||
|
On the Horizon |
US –
PPI, CPI, Eurozone –
German CPI, UK – GDP |
||
|
*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&P
500 and the Nifty were little changed last week. Indicators are bearish for
the week. Markets are oversold and are likely to find a short-term
bottom soon that will produce a meaningful rally. We are transitioning from
an inflationary regime to a deflationary collapse. The Nifty is
correcting from its recent highs.
The past week
saw US equity markets rise. Most emerging markets fell, as interest rates rose.
Transports are holding near recent lows, which is an ominous sign. The Baltic
dry index rose. The dollar was unchanged. Commodities fell. Valuations continue
to be quite expensive, market breadth fell, and the sentiment is now bearish.
Fear was unchanged this week, as a possible reality check from a FED Pivot
looms.
The recent
currency crisis should resume and push risky assets to new lows across the
board. Deflation is in the air despite the recent inflationary spike and bonds
are telegraphing just that. 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 tracking closely the 2000 moves down in the S&P
500, implying a panic low right ahead in the upcoming months (My views do not
matter, kindly pay attention to the levels). A dollar rebound from major
support is a likely catalyst.
The S&P
500 is encountering resistance near its recent highs. We have got bounces
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. Risky assets
should continue breaking to the downside across the board, as downward earnings
revisions are underway.
The Fed has
aggressively tightened into a recession. Deflationary busts often begin after
major inflationary scares. The market has rebounded after correcting
significantly, and more is left on the downside. The Dollar, commodities, and
bond yields are continuing to flash major warning signs.
The epic
correction signal occurred with retail, hedge funds, and speculators all in, in
January 2022, suggesting a major top is in. The moment of reckoning is here.
With extremely high valuations, a crash is on the menu. Low volatility suggests
complacency and downside ahead.
We rallied 46%
right after the Great Depression (the 1930s) first collapse and we rallied over
120% in our most recent rally of the COVID-19 lows. After extreme euphoria for
the indices, a highly probable selloff to the 3800 area is emerging on the
S&P 500, and 17000 should arrive on the Nifty in the next few months.
Global yield
curves have inverted significantly reflecting a major upcoming recession. The
recent steepening of the yield curve, within an inverted context, with rates
falling, is a precursor to the next recession, and the riskiest assets will
underperform going forward under such conditions. Looking for
significant underperformance in the Nifty going forward on challenging macros.
The critical
levels to watch for the week are 4320 (up) and 4295 (down) on the S&P 500
and 19750 (up) and 19550 (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 will get torched yet again and will likely prove to be a sell
on every rise. Gold is increasingly looking like the asset class to own
over the next decade, though the 2000 level could act as short-term resistance.
(Gold exploded almost 8 times higher over the decade following the dot-com bust
in 2000, just imagine what would happen when this AI bubble bursts? following
the recent crypto bubble burst) You can check out last week’s report for a
comparison. Love your thoughts and feedback.
