Market Signals For The U.S. Stock Market And Indian Stock Market Monday, Nov. 15

The S&P 500 was unchanged and the Nifty rose last week. Indicators are bullish for the week. Deflation is in the air. The recent rebound might run into resistance soon. Markets have been making new highs amid loads of divergences and a big move beckons for risk assets. Earnings revisions have been very good, entering a bullish seasonal period, but it is already in the price. Typical late-cycle Fed put stuff will likely lead to a taper tantrum following the recent taper announcement from the Fed and an imminent topTail risk has skyrocketed with the Skew/Vix ratio recently touching double digits. The market is about to begin an epic correction. Deflationary busts often begin after inflationary scares (the market is calling the Fed’s bluff) and long bonds are telegraphing just that. 

Indicator

Weekly Level / Change

Implication for

S&P 500

Implication for Nifty*

S&P 500

4683, -0.31%

Neutral

Neutral

Nifty

18103, 1.04%

Neutral **

Bullish

China Shanghai Index

3539, 1.36%

Bullish

Bullish

Gold

1868, 2.81%

Bullish

Bullish

WTIC Crude

80.72, -0.68%

Bearish

Bearish

Copper

4.45, 2.52%

Bullish

Bullish

Baltic Dry Index

2807, 3.39%

Bullish

Bullish

Euro

1.1444, -1.05%

Bearish

Bearish

Dollar/Yen

113.92, 0.46%

Neutral

Neutral

Dow Transports

16760, -0.50%

Bearish

Bearish

High Yield (Bond ETF)

108.54, -0.70%

Bearish

Bearish

US 10 year Bond Yield

1.57%, 7.40%

Bearish

Bearish

NYSE Summation Index

518, 12%

Bullish

Neutral

US Vix

16.29, -1.15%

Bullish

Bullish

Skew

144

Bearish

Bearish

20 DMA, S&P 500

4609, Above

Bullish

Neutral

50 DMA, S&P 500

4492, Above

Bullish

Neutral

200 DMA, S&P 500

4253, Above

Bullish

Neutral

20 DMA, Nifty

18092, Above

Neutral

Bullish

50 DMA, Nifty

17779, Above

Neutral

Bullish

200 DMA, Nifty

15913, Above

Neutral

Bullish

S&P 500 P/E

29.50

Bearish

Neutral

Nifty P/E

25.98

Neutral

Bearish

India Vix

15.22, -3.37%

Neutral

Bullish

Dollar/Rupee

74.35, 0.23%

Neutral

Neutral

 

 

Overall

 

 

S&P 500

 

 

Nifty

 

 

Bullish Indications

9

10

 

Bearish Indications

6

7

 

Outlook

Bullish

Bullish

 

Observation

The S&P 500 was unchanged and the Nifty rose last week. Indicators are bullish for the week.

The markets have begun a correction. Watch those stops.

   

On the Horizon

Eurozone –CPI, UK – Employment data, CPI, Japan - GDP

   
       

*Nifty

India’s Benchmark Stock Market Index

   

Raw Data

Courtesy Stock charts, investing.commultpl.com, NSE

   

**Neutral

Changes less than 0.5% are considered neutral

   

While market breadth and transports have improved, the Dollar, high yield, interest rates, and the skew are still flashing major warning signs. The epic correction signal is alive and well with retail, hedge funds, and speculators all in, despite the recent melt-up, 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. Extremely low volatility suggests complacency and downside ahead.

We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 100% in our most recent rally of the lows in the last 12 month period. After extreme euphoria for the indices, a highly probable selloff to the 3900 area is emerging on the S&P 500 and 13000 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. SPX 1800 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 that may be as low as 800 on the S&P 500 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) has dented global GDP significantly and will usher in a 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 are about to plunge yet again reflecting a major recession. The critical levels to watch for the week are 4695 (up) and 4670 (down) on the S&P 500 and 18200 (up) and 18000 (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 about to get torched soon (despite the bullish consensus emerging). Gold is increasingly looking like the asset class to own in the upcoming decade.

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