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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 FMCG Index

The FMCG index has been in wave 5 long term since 2009 and it has been an extended move. It did not stop at 5=1 [circle], it did not stop at the upper end of the rising channel. The momentum has been slowing down since it hit the upper line. Two possible outcomes exist. First and primary that we are in wave IV of 5 up that itself fits a channel. A move to the lower end of the channel would complete wave IV and then wave V up would unfold to one final new high. The other alternate is to think that 2013-2017 is an expanding pattern. The time taken makes it look like this is the less likely pattern but would be a valid alternate if the rising channel for wave 5 up breaks down.

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Bitcoin

Bitcoin has everyone's fascination. After each 5 wave rally an EW analyst would expect a correction, and if it is 3 waves like the last one in Sept. Now another 5 wave rise is in progress and must add at least 3 more waves up as shown to complete a 5 wave sequence before we can say this move is complete. I do believe however as discussed in the Podcast that Bitcoin is a manifestation of the liquidity bubble and therefore its final top may coincide with that of equities at some point with a lag.

PicsArt 10-24-08.06.04

US 10 year T Notes

The only reason I can think that drove fear into Indian markets would be the rising dollar accompanied by rising bond yields. The US 10 year treasury notes on Friday saw a bid dip closer to the wave 1 low. If broken it would confirm start of wave 3 up for bond yields. The 10 year notes should yields near 2.64% in wave 3. 

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