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.

US 10 year T Notes

The market has been so Euphoric about Trumps spending plans that it is all Long inflation. We could see that coming as the Oct Long Short report said ''Welcome to inflation'', but the impact that is missed is rising interest rates and the bond market tanked further in the US further as the risk on trade moved out of bonds. The jump in yields yesterday was ignored but pushed bond prices down into a 5th wave. Last week I considered the 3 wave decline to be A-B-C as RSI was at 30 already, but this break makes it 5 waves and therefore move bearish eventually. Right now though yields should bottom and bounce back soon as RSI is at 24. There is no rule why the wave cannot keep extending so till we go above the wave 4 high there is no clear bottom. But as of now the markets are ignoring higher yields in favor of spending growth in commodities.



I was reading a recent EWI published view on the BSE Realty index forming an ending triangle. However my wave counts show that the fall is far more complex. My earlier wave counts were that the top in 2010 is X and from there an ABC decline started and wave C down started from the 2014 top and we have only completed waves 1 and 2.

But as an alternate shown below if I consider this a triangle it would be a running triangle in wave B or X and another major wave down in wave Y or C is needed to complete the bear market in Realty stocks. So again here I disagree with them. The failure to breakout of the triangle should be noted for now.


Midcaps Done for now

3 Waves up complete the Midcap index broke the channel last week as did the Small cap and all other second line indices. This break is the best first sign of a trend reversal. RSI also broke the 45 shelf support so we should be in wave A/1 of the next leg down.


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