Market Signals For The U.S. Stock Market And Indian Stock Market – Monday, Nov. 20


The S&P 500 and the Nifty rallied last week. Indicators are bullish for the week. Markets have bottomed, 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 a bit overbought short-term and will likely pull back here.The past week saw US equity markets rise. Most emerging markets rose, as interest rates fell. Transports led the move up. The Baltic dry index rose. The dollar fell. Commodities except oil were mostly up. Valuations continue to be quite expensive, market breadth has rebounded, 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

4514, 2.24%

Bullish

Bullish

Nifty

19732,1.58%

Neutral **

Bullish

China Shanghai Index

3054, 0.51%

Bullish

Bullish

Gold

1984, 2.36%

Bullish

Bullish

WTIC Crude

75.86, -1.70%

Bearish

Bearish

Copper

3.73, 4.10%

Bullish

Bullish

CRB Index

274, 0.10%

Neutral

Neutral

Baltic Dry Index

1820, 9.97%

Bullish

Bullish

Euro

1.0916, 2.20%

Bullish

Bullish

Dollar/Yen

149.59, -1.26%

Bearish

Bearish

Dow Transports

14932, 3.51%

Bullish

Bullish

Corporate Bonds (ETF)

104.39, 2.17%

Bullish

Bullish

High Yield Bonds (ETF)

91.53, 0.90%

Bullish

Bullish

US 10-year Bond Yield

4.44%, -4.45%

Bullish

Bullish

NYSE Summation Index

-162, 63%

Bullish

Neutral

US Vix

13.80, -2.61%

Bullish

Bullish

Skew

147

Bearish

Bearish

CNN Fear & Greed Index

Greed

Bearish

Bearish

20 DMA, S&P 500

4325, Above

Bullish

Neutral

50 DMA, S&P 500

4339, Above

Bullish

Neutral

200 DMA, S&P 500

4266, Above

Bullish

Neutral

20 DMA, Nifty

19337, Above

Neutral

Bullish

50 DMA, Nifty

19589, Above

Neutral

Bullish

200 DMA, Nifty

18709, Above

Neutral

Bullish

S&P 500 P/E

24.94

Bearish

Neutral

Nifty P/E

21.10

Neutral

Bearish

India Vix

11.83, 6.48%

Neutral

Bearish

Dollar/Rupee

83.29, -0.02%

Neutral

Neutral

 

 

Overall

 

 

S&P 500

 

 

Nifty

 

 

Bullish Indications

15

15

 

Bearish Indications

5

6

 

 

Outlook

Bullish

Bullish

 

Observation

 

The S&P 500 and the Nifty rallied last week. Indicators are bullish for the week.

Markets have bottomed. Watch those stops.

   

On the Horizon

Eurozone –German GDP, China – PBOC rate decision

   

*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 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.Global yield curves have inverted significantly reflecting a major upcoming recessionThe 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 4525 (up) and 4500 (down) on the S&P 500 and 19800 (up) and 19650 (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 last week’s report for a comparison. Love your thoughts and feedback.More By This Author:Market Signals For The U.S. Stock Market And Indian Stock Market – Monday, Nov. 13Market Signals For The S&P 500 And Indian Nifty Index – Monday, Nov. 6 Market Signals For The U.S. Stock Market And Indian Stock Market – Monday, Oct. 2

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