Contents:

Intermarket Analysis

Tremors on the stock market in Tokyo are felt first in Trying to trade stock, bond, commodity and currency markets without intermarket awareness is like trying to drive a car without looking out the side and rear windows--very dangerous. In this guide to intermarket analysis, the author uses years of experience in technical analysis plus extensive charts to clearly demonstrate the interrelationshps that exist among the various market sectors and their importance. Youll learn how to use activity in surrounding markets in the same way that most people employ traditional technical indicators for directional clues.

Shows the analyst how to focus outward, rather than inward, to provide a more rational understanding of technical forces at work in the marketplace. Additional Details Series Volume Number.

3 Pillars of FX Markets – Building Portfolios (Part 2)

Commodity Prices and Bonds. Commodities and the U.

Relative-Strength Analysis of Commodities. Commodities and Asset Allocation. Intermarket Analysis and the Business Cycle. The Myth of Program Trading. A weak Dollar acts an economic stimulus by making US exports more competitive. This benefits large multinational stocks that derive a large portion of their sales overseas.

Inflationary Relationships.
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What are the effects of a rising Dollar? A country's currency is a reflection of its economy and national balance sheet. Countries with strong economies and strong balance sheets have stronger currencies. Countries with weak economies and big debt burdens are subject to weaker currencies. A rising Dollar puts downward pressure on commodity prices because many commodities are priced in Dollars, such as oil. Bonds benefit from a decline in commodity prices because this reduces inflationary pressures.

Stocks can also benefit from a decline in commodity prices because this reduces the costs for raw materials.

Not all commodities are created equal. In particular, oil is prone to supply shocks. Unrest in oil producing countries or regions usually causes oil prices to surge. A price rise due to a supply shock is negative for stocks, but a price rise due to rising demand can be positive for stocks.

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This is also true for industrial metals, which are less susceptible to these supply shocks. As a result, chartists can watch industrial metal prices for clues on the economy and the stock market. Rising prices reflect increasing demand and a healthy economy; falling prices reflect decreasing demand and a weak economy.

Industrial metals and bonds rise for different reasons. The ratio of industrial metal prices to bond prices will rise when economic strength and inflation are prevalent. This ratio will decline when economic weakness and deflation are dominant. Intermarket analysis is a valuable tool for long-term or medium-term analysis.

While these intermarket relationships generally work over longer periods of time, they are subject to draw-downs or periods when the relationships do not work. Big events, such as the US Financial crisis, can throw certain relationships out of whack for a few months. Furthermore, the techniques shown in this article should be used in conjunction with other technical analysis techniques. One indicator or one relationship should not be used on its own to make a sweeping assessment of market conditions.

The slider at the bottom of the chart makes it easy to travel back in time and view the relationship changes as they happen. Click here for a live Intermarket PerfChart. In order to use StockCharts.

Intermarket Technical Analysis.
Intermarket Technical Analysis by Murphy, John J!
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Table of Contents Intermarket Analysis. These are the key intermarket relationships in an inflationary environment: Positive relationship between bonds and stocks. Inverse relationship between bonds and stocks. Trading with Intermarket Analysis John Murphy. Your Browser does not have JavaScript enabled!