The S&P 500 and the Nifty were up last week. The indicators are mixed for the upcoming week. Despite the big rally last week, markets only got as far as the breakdown trend lines and started reversing lower. An epic meltdown is just around the corner. Long term, QE forever from the Fed is about to trigger the deflationary collapse of the century and we are likely making another major top in global equity markets.

The market is looking like the short of a lifetime with a non-conformations from the transports, other global indices and commodities. Insane valuations continue. The breakdown in crude is likely a precursor to a massive drop in the S&P 500. The recent virus epidemic in China is likely to usher in a recession 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 strong dollar. Looking ahead for a significant underperformance in the Nifty going forward on rapidly deteriorating macros. A 5-year deflationary wave is about to start in key asset classes like the Euro, stocks and commodities amidst a number of bearish divergences and overstretched valuations. We are on the verge of 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 as off late as the yield curve inverts. The critical levels to watch for the week are 3340 (up) and 3315 (down) on the S&P 500 and 12150 (up) and 12000 (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.