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 Midcap

Today's market moves were interesting because of the non confirmations that continue to exist. The new high in Nifty is not confirmed by the Midcap Smallcap and Bank nifty. Today all indices closed down except the Nifty. The Midcap index below formed an engulfing bear candle for the day. That at the end of a A-B-C rise from the low see in May, and where wave C has now subdivided into 5 waves. This makes the high today an important level to watch. A downtrend from here would be wave C down and break the May low as well and would taken down with it the Mid and Small cap market. So keep an eye on it.


BSE Small Cap Index

While we need an actual price reversal the BSE Small cap index has performed the best in the second line indices, making a new high. Doing so the entire structure for the last 2 months looks like an ending diagonal. An actual price move down has to confirm that the move up from the recent low is 3 waves in E. An ending pattern is a rising triangle that forms at the end of a trend and its completion.



US 30 year Treasury bonds

While the 10 year has already broken the rising channel 2 days ago the 30 year bonds are now at the rising trendline near 152. So a further decline in the bond market will get this second confirmation of a break down in the bond market. We would be at the start of a 3rd wave down in US bonds. [We have discussed this scenario and its impact in this months Long short report.]


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