The S&P 500 rallied and the Nifty fell last week. Indicators are bullish for the week. Markets are at resistance, as we enter bullish seasonality. We are transitioning from an inflationary regime to a deflationary collapse. The Nifty has caught up to the upside. We are way overbought short-term and will likely pull back here sharply.The past week saw US equity markets rally. Most emerging markets were unchanged, as interest rates fell. Transports were unchanged. The Baltic dry index fell. The dollar fell. Commodities rose. Valuations continue to be quite expensive, market breadth improved, and the sentiment is now exuberant. Fear abated this week, as a possible reality check from a Fed Pivot looms.After this rally, 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.
Asset Class
Weekly Level / Change
Implication for S&P 500
Implication for Nifty*
S&P 500
4755, 0.75%
Bullish
Bullish
Nifty
21349, -0.50%
Neutral **
Bearish
China Shanghai Index
2915, -0.94%
Bearish
Bearish
Gold
2065, 1.18%
Bullish
Bullish
WTIC Crude
73.49, 1.41%
Bullish
Bullish
Copper
3.90, 0.37%
Neutral
Neutral
CRB Index
267, 0.57%
Bullish
Bullish
Baltic Dry Index
2094, -10.82%
Bearish
Bearish
Euro
1.1015, 0.85%
Bullish
Bullish
Dollar/Yen
142.37, -0.17%
Neutral
Neutral
Dow Transports
16064, 0.30%
Neutral
Neutral
Corporate Bonds (ETF)
110.10, 0.18%
Neutral
Neutral
High Yield Bonds (ETF)
94.84, 0.66%
Bullish
Bullish
US 10-year Bond Yield
3.90%, -0.87%
Bullish
Bullish
NYSE Summation Index
921, 24%
Bullish
Neutral
US Vix
13.03, 3.74%
Bearish
Bearish
Skew
135
Neutral
Neutral
CNN Fear & Greed Index
Extreme Greed
Bearish
Bearish
20 DMA, S&P 500
4641, Above
Bullish
Neutral
50 DMA, S&P 500
4468, Above
Bullish
Neutral
200 DMA, S&P 500
4336, Above
Bullish
Neutral
20 DMA, Nifty
20831, Above
Neutral
Bullish
50 DMA, Nifty
20021, Above
Neutral
Bullish
200 DMA, Nifty
19060, Above
Neutral
Bullish
S&P 500 P/E
26.27
Bearish
Neutral
Nifty P/E
22.81
Neutral
Bearish
India Vix
13.71, 4.42%
Neutral
Bearish
Dollar/Rupee
83.17, 0.03%
Neutral
Neutral
Overall
S&P 500
Nifty
Bullish Indications
11
10
Bearish Indications
5
7
Outlook
Bullish
Bullish
Observation
The S&P 500 rallied and the Nifty fell last week. Indicators are bullish for the week.
Markets are at resistance. Watch those stops.
On the Horizon
*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
(Click on image to enlarge)
The S&P 500 is encountering resistance near its 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. 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.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. The critical levels to watch for the week are 4765 (up) and 4745 (down) on the S&P 500 and 21450 (up) and 21250 (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. (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 for a comparison. Love your thoughts and feedback.More By This Author:
