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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.

US 10 year T Notes

US Treasury notes are falling in 5 waves after breaking the rising blue trendline. A short term bounce back may occur in wave 2 before wave 3 to new lows takes over. It is also possible that prices keep on falling as the RSI is not oversold yet. The important part is knowing that US Bonds are falling as the Fed starts to unwind its holdings of treasuries. And the trend to higher rates will mostly continues despite small pauses. The markets will ignore this trend till they cannot.

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Indian 10 year G Sec

Yesterday was a big tick up in the Indian 10 year yields and probably the reason for the late day selling in stocks. Today appears relatively quite so far. But keep an eye on this trend as it remains positive. In other words market rates are rising.

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BSE Healthcare

 The question is asked often... Have Pharma stocks bottomed out? Here is a quick take using the BSE Healthcare index. The fall fits a nice falling channel and we did bottom at the lower end of the channel, after what has so far been a complex 3 wave decline. Marked as W-X-Y, what is left open is whether the next move up is the start of a new bull phase for Pharma stocks or just an X wave. Ideally long term corrections will go on till point Z and therefore I cannot conclude that the worst is over even after 2 years in the channel. The best approach is to keep expectations for an X wave to the upper end of the channel and remain open to wave Z down in one more decline when it happens. After that it might be worth considering a longer term bottom for the Sector.

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