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.

Bonds v/s Equities

I have no problem noting that US equities rallied from the point bonds bottomed. But clearaly bond market rallies are associated with equity declines [Dow in this case], and the reverse. So the bond market crash [upper half of chart], is associated with a stock market rally since June [Brexit]. However even after bonds bottomed in Dec they have not taken off upwards and equities have so it is a long wait but sooner than later when you see bond prices get a bid again it will cause an equity market decline. It is just history


US 30yr Bonds

The 30 year bond price has been in a trading range for 2 months that looks like a triangle. 149.80 is the lower end of the range where wave e of B should complete. Following its completion we should expect wave C up to unfold. Rising bond prices have evaded me for a while but we now have multiple bottoms at this level that I believe should eventually lead to higher prices [lower yields]. This might have nothing to do with the FED hike expectations I think but lets see. A 25 basis hike might be priced in at these yields. Bonds might just get the safe haven bid in wave C up.


US 10 year T Notes

US T notes rallied, as expected since December. But as you see it is a slow moving animal. So as we broke out of a inverted H&S bottom yields will fall further in the coming months. Now unlike EWI I have marked the rise as I-II-III etc of Wave A, while they are marking a-b-c and expecting an immediate decline. I am considering a prolonged rise for bonds because that is what happened the last time as well on the long term chart below after the bottom in 2013. The larger view that you wont make a new high was true but the move up was 2 years long. Bonds are slow moving animals. So even now the counter trend move up could go on for months to come, and it is better to consider it as a larger A-B-C that will take its time before the next leg down shows up.


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