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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.

BitCoin

Bitcoin stalled at 61.8% at 9761, unless we go above that high, wave B up maybe complete if you consider the initial decline a leading diagonal. The implications of that are that C=A to below 5200 opens up.

bitcoin 260418

US 2 Year abd 10 Year comparison

With the FED raising short term rates, the 2 and 5 year bond markets have led the way down for the bond market. As was the case last week they fell first to new lows. So first let me show you the 10 year that started wave 5 in a perfect channel [This is an upside down chart so the rising trend means falling bonds] and could be source of considerable fear as we go toward 118.50 at the channel or 117.50 where 5=1. 

bonds 210418

However despite the bearish set up above I have only one concern that I discussed in the video on Friday. The 2 year has fallen so fast that the RSI is at 22 on daily and 16 on weekly. Weekly RSI has remained below 30 for months now. So this extreme oversold condition can get relieved suddenly when bond bears decide to cover shorts a bit near term. Not sure of the trigger, could be anything. Not sure that happens in a day or 5 but who knows when. Till that happens falling bond markets are a scare for most markets. As shown the fall in the 2 year would only be a third wave so 4 up and 5 down later still pending.

bonds 210418a

Lastly as noted in my currency update if the dollar and bonds are inversely correlating again then will a falling dollar [as I still expect], cause bonds to rally? So the bond market collapse is a slow motion train wreck but just in case some of these factors kick in, the current short term fear around bond markets can get pushed ahead in time a bit. Something to think about and watch closely. See if the dollar tops and its impact on the bond market for clues on monday/tuesday.

Bonds v/s Dollar

The US bond market started to fall in wave 5 as anticipated with one difference. The dollar was not falling along side with it. The correlation between the two keeps changing from time to time. The recent period saw an inverse relationship till Nov 2017, but after that both fell together [inside the vertical lines]. It took two months for equities to react to this trend. When both fall foreign investors in US debt are hurt significantly. So this week when both moved in opposite directions it is back to the earlier trend. When both fall together again is when I would really be worried as it would signal an exodus from US bonds. Till then it is a reaction to other factors

bonds dollar

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