The S&P and the Nifty made new highs last week. Indicators are bullish for the week. The epic crash signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up and break out of the long term broadening top, suggesting a major top is imminent. The moment of reckoning is very near.  Technicals are about to track fundamentals and turn bearish. The market is yet to price in one of the worst earnings decline periods in stock market history. With extremely high valuations, a crash is on the menu. Low volatility suggests complacency and more downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 65% in our most recent rally of the lows in a similar 6 month period. After extreme euphoria for the indices, a highly probable selloff to the 3000 area is emerging on the S&P, and 10000 should arrive on the Nifty in the next few months. The Fed is repeating the Japan experiment and the lost 3 decades in Japan (1989-2019) is set to repeat across the globe. SPX 1500 and lower in a year and we stay there till 2030, scary? The markets are very close to an epic meltdown and the SPX is headed way lower.

The markets are overvalued, overbought and out of touch with economic realities. Long term, the epic meltdown is set to continue resulting in a 5 year plus bear market with lot lower levels may be as low as 800 on the S&P. QE forever from the Fed is about to trigger the deflationary collapse of the century as we make a major top in global equity markets. The market is looking like the short of a lifetime with topping action in the transports, other global indices, and commodities. High valuations continue.

The recent global virus epidemic (black swan) is likely to dent global GDP significantly and usher in depression much faster than most think. The trend is about to change from bullish to bearish and the markets are about to get smashed by a rebounding dollar. Looking for significant underperformance in the Nifty going forward on rapidly deteriorating macros. A 5-year deflationary wave has started in key asset classes like the Euro, stocks, and commodities amidst several bearish divergences and overstretched valuations.

We are entering a multi-year great depression. The markets are still trading well over 3 standard deviations above their long-term averages from which corrections usually result. Tail risk has been very high of late as interest rates plunge into a recession. The critical levels to watch for the week are 3900 (up) and 3875 (down) on the S&P 500 and 15000 (up) and 14850 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. Love your thoughts and feedback.