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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.

BSE 500

The BSE 500 was not the only chart that formed an ending triangle over the last few weeks but it has the clearest Picture of it with touch points. Further the index has broken down from the pattern and so have the Midcap and Small cap indices. This pattern occurs at the end of a trend and therefore it is important and will have implications for the trend for weeks to come.

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US 30yr Bonds

The US bonds retraced 61.8% and started to rise again, Wave C up for bonds should mark another risk off for US equities.

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VIX - Volatility index

The US VIX has been in the news in the last few days. So right after the India VIX made its lowest reading on record, the US VIX has dipped to a low that touches the trendline of the low in 1993 to the low in 2006. In the long term history of the VIX these low points did not mark major market tops. At the same time it maybe noted that the US VIX rises higher much before such an event. So volatility was already rising into the 2007 S&P top before it happened. 

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On the other hand shorter term lows in the VIX have been associated with near term market corrections and therefore we may still pay attention to it. The recent low is also on the trendline of the lows of the last two years. So a rise in near term volatility from here when it happens would give us a near term correction is all we can say with this.

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