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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.

India VIX - No worries at all

I am just Intrigued enough by the Low VIX to post this timeless poster from the ''MAD Magazine" on the India VIX, need I say more?

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US 10 year T notes

I have written a lot about the inverse relationship of T notes and US equities and was anticipating for a while that the wave 2 rally could go on for months. Last week however bonds were down. No So far wave 2 has not even retraced 38.2% and it appears small, but EWI started to anticipate a 3rd wave down already, and it is a valid wave count. So let me discuss the reason. First on classic TA we have seen prices touch the 40 week average and sell off so till we cross that higher levels do not come right away. But if we break 125, near the 40dema, then we could be falling further. EWI's reason is that this small little bounce has seen Speculators go back to a huge long position on CFTC futures. The position for the ten year is bigger than it was at the wave 2 circle top in June 2016 last year. So that is extreme. In short traders went so quickly back from short to long that the tide may have changed. Let me add that yields are rising across Asia, including the India 10 year GSEC. So we may have a situation here that no one is watching. Wave 3=1 down for US T notes can mean that yields go up from 2.3% now to 3.5% over the next 6 months. That is big. So till what point will a falling bond market keep up the argument of money flowing into equities? There will be an inflection point when everyone especially the currency markets take note of a crash in the bond market. In fact the EM currencies have already started to decline decoupling from the dollar index. This trend should be watched closely as well. It could mean a falling dollar index and a falling rupee[INR], real[BRL], yuan[CNY], TWD, THB, RUB, ZAR etc.

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BSE Metals index

The BSE Metals index remains in a downtrend. The recent bounce back is facing resistance near the averages and if we break the rising trendline of the 1 year long channel then it would confirm that we head to 9500 on the index, a deeper cut in prices. A move below 10897 could be negative.

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