Market Signals For The U.S. Stock Market And Indian Stock Market - Monday, July 4
The S&P 500 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.
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&P 500 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 |
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*Nifty |
India’s Benchmark Stock Market Index |
||
Raw Data |
Courtesy Stock charts, investing.com, multpl.com, NSE |
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**Neutral |
Changes less than 0.5% are considered neutral |
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&P 500, 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.
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Disclaimer: The views expressed here are my own and must not be taken as advice to buy or sell securities.