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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 Metals

The BSE Metal index has completed a 5 wave advance from the Sept low and possibly from the May bottom. With Base metal prices also giving up expect a deeper cut in metal stocks in the coming weeks as they give back some of the gains. Going back to the wave iv low is normal. 

metals 311017

Indian - Chinese Bond Yields

Are global Bond yields correlated? In the environment of global liquidity flows most asset markets have become highly correlated. So just like equities we see similar trends in bond markets as well. Especially after India opened up its govt securities market. So you have been reading about the Chinese bond yields rising. So do they mean anything. Here is a chart of the Indian and Chinese yields on the 10 year on the same chart. What you see is the similarity in trends since 2014. Starting Mid of 2016 US bond yields started to rise and following that global bond yields are inching higher. The only reason we lagged behind is the direct intervention from Demonetisation that pushed liquidity into Indian banks and then from there to the bond markets. The chart shows how during that period the trends become inversely correlated. That done we are now see the relationships re-emerge. Bond yields are rising in China and so are they in India. They are not different from each other. RBI intervention apart these trends would continue.

BONDyields

Nifty PSU Bank index

After the spike up wave X that was presumed to have ended at the May top ends now and wave Z down the final leg of the bear market for PSU banks still lies ahead and not behind.

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