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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 IT Index

BSE IT index shows that a 5th wave started in March and I identified it as the best sector for this month in Last months Long Short report. However we maybe at the end of the recent rally in wave v of 5 and so the best part of the short term move is over. Do not look at the USDINR for clues for this sector because there is not long term correlation between then two. 

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Bank of New York ADR Index

The US ADR index of global stocks has an interesting pattern. It topped recently bang at the blue line. The blue lines mark an expanding pattern in wave B of a 2 decade developing pattern. Wave A was a clear 5 wave decline. Wave C down then is going to be another 5 waves down and will not be over till the wave A low is broken. The blue lines are setting the stage for this.

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US 30 Year Bonds

The 30 year bond yields are looking very different from the 10 year. First they lagged behind and now the wave structure is wave 3 up starting v/s wave 5 on the 10 year. The move should logically have a long way to go because 3=1 is at 3.6%, and we are 3.2%, and the larger third wave [blue] on arithmetic scale goes to 3.76% and on a log scale to 4.06%. The US year bonds I believe were the reason that equity markets took note of the rising rates in Feb and sold off. Till then the market was complacent. The Feb high in the 30 year yield was 3.233 and we are at 3.21 as of yesterday. We should be heading to 3.6% at least in this move in the coming weeks. Ignorance is bliss?

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