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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.

Bonds Equity Inversion

I first wrote about this coming inversion at the Dec low in the bond market however US bonds spent few more months making a double bottom and allowing for an equity rally. But now the bottom is firmly in place for the coming months and a bond market rally should keep the pressure on US equities in the coming weeks.

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The near term daily chart of the US 10 year notes shows the momentum remains in buy mode for weeks and the rising trendline from the bottom is working as a support.

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BSE 500 - Where are we in the trend?

The relentless advance of the broad market raises the question everyday of the raging bull market that the Nifty is not clearly participating in. So I chose to make sense of the Wave count of the BSE 500 so far and what does the new high in these indices today tell us. The BSE 500 completed C=A in March then consolidated in an X wave mostly a triangle. The subsequent move is a smaller A-B-C structure and today's new high is wave v of C of the move. C=A for this set up has also been achieved. So we are in the final push higher. The next move down should mean either another X wave or a complete trend reversal. Apparently all the lows of the 3 month period are on a trendline which is at 12680 so a close below 12680 maybe a sign that the trend has reversed.

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US 30yr Bonds

the US 30 year has bottomed at 61.8%, the last time it did at 66%. In continue to anticipate a multi month bond rally in the US from here as the recent lows involved some of the most bearish bond market sentiment on record. Which is why even the recent Fed statements on reducing the size of their balance sheet had no impact on the bond market. It is already very oversold and due for a lot of short covering.

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