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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.

HUI SPX Ratio

The HUI SPX ratio - shows how gold stocks performed relative to common stocks over the last 2 decades. It is a very clear chart and interesting as the trends are very clear. 

For the last year the trend turned up breaking out of a falling channel.

hui-011116

Midcaps

The Nifty and Midcap indices have diverged for long however till we break this rising channel the trend down will not take shape. Till then we can continue to extend higher as we have for 7 months now.

 midcap-201016

US 10 year T Notes

The US 10 year yields continue to rise today. The trend down for bonds started months ago and we identified it with the 5 wave decline on the daily chart and even before with the A-B-C rise in wave Z of the 10 year Note shown below. For months i tracked the end point to Z. From there on however I was keeping an eye on the 30 year because of the major inter market divergence between the two. The 30 year or the Long bond was at record levels but the 10 year is still below the 2012 top as seen below. After a complex triple zig-zag retracement a new wave down has started for the 10 year. I have tried marking a wave 2 support for both the contracts but prices have fallen lower. 

tnotes121016

Now the short term chart of the 10 year shows an extending decline and not a leading like the 30 year. The n10 year indicates that apart from small bounces yields may continue to rise. RSI near 30 can get oversold but would only provide support for a 4th wave bounce.

 tnotes121016a

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