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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.

Long Term top in Bond markets

I should add the following chart with wave counts that I published multiple times since 2012. That the 10 year notes formed an ending pattern into the 2012 high. At the wave B high this year the 30 year bonds or long bond made its all time high and ending pattern, delivering a massive inter market divergence between the 10 and 30 year yields. The give up from there therefore should technically mean a long term major top in bonds and the start of a bear market. For the 10 year the bear market started in 2012 and now wave C of the decline has started with the rising channel broken. Wave C will go well below the point wave A, so the yields seen in 2013 will be exceeded. In fact wave C can see extentions so this can be big. I do not know how a major bond market collapse can happen without the dollar crashing so somehow my head says do not believe the rising dollar. People do not buy rising yields they buy falling yields [which means rising bond prices]. The dollar and bond prices below were rising from 2008-2016. That is now over. If bonds are falling so will the Dollar so stay tuned, do not extrapolate the dollar rise into perpetuity. Also avoid correlations of your currency pairs with the dollar index they will not work. Floating rates of currencies only reflect money flow in and out of assets.

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US 10 year T Notes

The US 10 year notes peaked in 2012 and were rising in a counter trend channel.l Yesterday prices fell far enough to break and close below that channel. Clearly this is a longer term change in trend to wave C down. All I am looking for is a bounce back in wave 2 of C from oversold conditions after that wave V will take prices of 10 year notes back to 2011 levels.

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Small Caps

The small cap indices were the best performers into the first week of Nov against the rest of the Market and the divergence was stark. That said most Mid and small cap indices sport a throwover the trendline of the previous two tops. But the Nifty Small 100 did not do so. It remains within the overall ending structure. Ending diagonals occur at the end of a trend. So implications for small stocks are long term

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