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Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin is a PhD and received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Sunday 30 August 2020

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning August 31


Indicator

Weekly Level / Change

Implication for

S & P 500

Implication for Nifty*

S & P 500

3508, 3.26%

Bullish

Bullish

Nifty

11648, 2.43%

Neutral **

Bullish

China Shanghai Index

3404, 0.68%

Bullish

Bullish

Gold

1973, 1.34%

Bullish

Bullish

WTIC Crude

42.96, 1.46%

Bullish

Bullish

Copper

3.01, 3.11%

Bullish

Bullish

Baltic Dry Index

1504, 1.55%

Bullish

Bullish

Euro

1.1901, 0.90%

Bullish

Bullish

Dollar/Yen

105.36, -0.40%

Neutral

Neutral

Dow Transports

11322, 3.49%

Bullish

Bullish

High Yield (Bond ETF)

105.79, 0.63%

Bullish

Bullish

US 10 year Bond Yield

0.72%, 14.65%

Bearish

Bearish

Nyse Summation Index

675, -15.97%

Bearish

Neutral

US Vix

22.96, 1.86%

Bearish

Bearish

Skew

146

Bearish

Bearish

20 DMA, S and P 500

3386, Above

Bullish

Neutral

50 DMA, S and P 500

3259, Above

Bullish

Neutral

200 DMA, S and P 500

3083, Above

Bullish

Neutral

20 DMA, Nifty

11315, Above

Neutral

Bullish

50 DMA, Nifty

10987, Above

Neutral

Bullish

200 DMA, Nifty

10821, Above

Neutral

Bullish

S & P 500 P/E

30.16

Bearish

Neutral

Nifty P/E

32.92

Neutral

Bearish

India Vix

18.35, -7.97%

Neutral

Bullish

Dollar/Rupee

73.12, -2.41%

Neutral

Bullish

 

 

Overall

 

 

S & P 500

 

 

Nifty

 

Bullish Indications

11

15

Bearish Indications

5

4

Outlook

Bullish

Bullish

Observation

The S and P and the Nifty were up last week. Indicators are bullish for the week.

The markets have begun a great depression style collapse. Watch those stops.

On the Horizon

Euro Zone – German employment data, CPI, US – Employment data

*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 and P 500 and the Nifty rallied last week. Indicators are bullish for the coming week. The recent rally to the prior highs is on borrowed time as we experience one of the worst earnings decline period in stock market history with extremely high valuations amid a lot of bearish divergences and a September / October crash is on the menu. We rallied 46% right after the great depressions (1930’s) first collapse and we have rallied over 50% 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 2700 area is emerging on the S and P, and 9000 should arrive on the Nifty in short order. 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 by year end and we stay there till 2050, scary? The markets are very close to an epic melt down 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 maybe as low as 800 on the S and P. QE forever from the FED is about to trigger the deflationary collapse of the century and we have made a major top in global equity markets. The market is looking like the short of a life time with non-conformations from the transports, other global indices and commodities. High valuations continue. The breakdown in Crude and the Euro is a precursor to yet another massive drop in the S and P 500. The recent global virus epidemic (black swan) is likely to dent global GDP significantly and usher in a depression much faster than most think. The trend has changed from bullish to bearish and the markets are getting smashed by a strong dollar. Looking for significant under performance 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 a number of bearish divergences and over stretched 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 off late as the yield curve inverts into a recession. The critical levels to watch for the week are 3520 (up) and 3495 (down) on the S & P 500 and 11750 (up) and 11550 (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.

Tuesday 23 July 2019

Nasdaq - Nasdaq 100 Ratio at 2000 Levels - Massive Crash Just around the Corner?

After 19 long years the Nasdaq - Nasdaq 100 Ratio has reached the record lows it saw in 2000, when a hand full of tech stocks outperformed the broader market.  This occurred at the market peak just before the dotcom bubble burst taking the Nasdaq down almost 80% and the rest of the market over 40%. This time will be no different with a massive market crash just around the corner, with all signs such as global inverted yield curves and trade wars pointing to a severe recession ahead:

nasdaq - nasdaq 100 ratio - market crash

Saturday 10 March 2018

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning March 12

Indicator
Weekly Level / Change
Implication for
S & P 500
Implication for Nifty*
S & P 500
2787, 3.54%
Bullish
Bullish
Nifty
10227, -2.21%
Neutral **
Bearish
China Shanghai Index
3307, 1.62%
Bullish
Bullish
Gold
1324, 0.05%
Neutral
Neutral
WTIC Crude
62.04, 1.29%
Bullish
Bullish
Copper
3.14, 0.37%
Neutral
Neutral
Baltic Dry Index
1201, 0.42%
Neutral
Neutral
Euro
1.2307, -0.09%
Neutral
Neutral
Dollar/Yen
106.77, 0.98%
Bullish
Bullish
Dow Transports
10740, 3.94%
Bullish
Bullish
High Yield (ETF)
36.09, 0.25%
Neutral
Neutral
US 10 year Bond Yield
2.89%, 1.30%
Bearish
Bearish
Nyse Summation Index
164, 1023.97%
Bullish
Neutral
US Vix
14.64, -25.27%
Bullish
Bearish
Skew
128
Neutral
Neutral
20 DMA, S and P 500
2714, Above
Bullish
Neutral
50 DMA, S and P 500
2742, Above
Bullish
Neutral
200 DMA, S and P 500
2571, Above
Bullish
Neutral
20 DMA, Nifty
10420, Below
Neutral
Bearish
50 DMA, Nifty
10606, Below
Neutral
Bearish
200 DMA, Nifty
10140, Above
Neutral
Bullish
India Vix
14.52, 3.22%
Neutral
Bearish
Dollar/Rupee
64.93, -0.39%
Neutral
Neutral


Overall


S & P 500


Nifty

Bullish Indications
10
6
Bearish Indications
1
6
Outlook
Bullish
Neutral
Observation
The S and P 500 rallied and the Nifty fell last week. Indicators are mixed.
The markets have made important tops. Time to watch those stops.
On the Horizon
New Zealand – GDP, China – Industrial production, Euro Zone – German ZEW economic sentiment, CPI, Switzerland – SNB rate decision, U.S – CPI, Retail sales, Oil inventories, Canada – Poloz speech
*Nifty
India’s Benchmark Stock Market Index
Raw Data
Courtesy Google finance, Stock charts, investing.com
**Neutral
Changes less than 0.5% are considered neutral


stock market signals march 12
Image from marketwatch.com

The S and P 500 rallied and the Nifty sharply under performed last week. Indicators are mixed for the upcoming week. Quantitative tightening by the FED is yet to be priced in fully. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. Divergences in high yield and surging bond yields are flashing warning signs. An interest rate shock can’t be ruled out. Indian market volatility is still below US market volatility so there is complacency and some catch up left on the down side. The critical levels to watch are 2800 (up) and 2775 (down) on the S & P and 10300 (up) and 10150 (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.

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.