Inter Market Analysis

Inter market analysis is a series of articles studying related segments of the market to identify lead lags between trends in each segment. This can often forewarn you of impending changes in trend and allow for planning of required action based on it. For example midcaps v/s large caps, currencies v/s commodities and US markets v/s European markets and so on. In a global environment inter-market relationships are not restricted to a country but between countries and their respective asset classes as well.

US 10 Year Treasury notes

The US 10 year completed a 3 wave rise in a flag/channel and the next wave lower should have stated this morning. Bond prices should see new lows in wave 5 in the coming days.

notes 090518

India ADR

The Bank of New York Indian ADR index, has not managed a meaningful bounce back since the top in Jan, not when US stocks bounced and not when Nifty staged its April rally, not when IT stocks rallied. It is sliding slowly. The long term chart shows that Jan top could very well be wave E of a 9 year long ending pattern, indicating more declines ahead and a break below the 1540 level at the lower end of the wedge.

india adr 


After breaking out from the downtrend the US VIX is holding out at a higher base. 14.8% is where I have put the blue line. If the higher bottom holds then it is indicative of a trend in higher volatility. The next move up in the VIX then would retest the 50% mark or go even higher. The fact that multiple rallies in the US have not relieved volatility to lower levels is signalling weakness ahead for US stocks.

vix 030518

In that light India VIX has gone back to where we were in Jan. Can it really stay down there. I doubt it and maybe it has far more to rise too. The recent drop in volatility might then be the greatest aberration in volatility that we are seeing, as Nifty under-prices risk.

india vix

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