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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 Auto Index

The Indian Auto sector was on a rage for years but the trend has been narrowing down in the last few years. The performance of stocks in the sector has also diverged. All this resulted in the Auto index completing an ending pattern in wave 5. If we close down for this month the high may have been put in for the Long term trend. A 5 wave rally from 2001 would be complete where 3<1 and 5<3. The Indian Auto sector stocks could then enter a deeper bear market.

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Ending the Nifty Small 100

The Nifty Small 100 index blew past the upper line of the long term ending pattern but should be a throwover. A move back below 7027 would make this breakout false and the breakdown the start of a prolonged bear market in the Midcap and Smallcap space that will impact most portfolios now overly exposed to this segment.

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US 30 year Treasury bonds

The 30 year bonds are still holding up and in wave v of C up. The bonds might make one more push higher at least and get closer to the upper end of the channel before we get a meaningful trend reversal from the rising trend in bonds.

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