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 T Notes

T notes are selling off from the green 40dema, and they closed below the 20dma as well pushing the momentum back to the sell side. This remains a precarious space as the next wave down could be wave 3 and see US bond yields spike up sharply.

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BSE Healthcare / Phrama

The pharma pack of stocks show divergent trends and so it is hard to fit all of them based on the index. Near term news has driven independent trends. So will cover a handful of pharma stocks today but let us start with the index first. Using the BSE Healthcare index we have 3 legs of the bear market complete in waves W-X-Y and waves X and Z are next. We may already be in an X wave that has not yet touched the upper channel line. It is hard to say that wave X is over so it can go on for a while. The last leg down will be wave Z. While the Nifty is at a high the Pharma index may end its bear market early which is often the case when defensive buying emerges during an general equity bear market. But that might still take at least one quarter more to complete.

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BSE Finance

With the advent of so many indices there is always an index you will find to justify something. So while wave E has thrown over the upper line in the Nifty, I have changed it to wave 5 at the top, wave E is not ruled out on the Nifty 500 or on this new BSE Finance index with perfect touch points. Unlike the Banking index that has less than a dozen stocks in it the BSE Finance index has 100 stocks in it. So it is a better representation of the sector or industry. This is a distribution pattern with pattern implications for a move down to below the neckline equal in size to the pattern itself.

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Similarly on the S&P BSE Sensex Next 50 index, with a slight throw over.

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So Nifty may have gone too far for E but a close below 10230 puts it inside the trendline of the previous two highs that it broke out of. Staying below 10230 therefore is a sign of failure.

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