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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.

ADR Index

This leading index of world markets, the ADR index [or the MSCI World] which ever you look at, wave c up for the recovery is just starting in many markets now. So it is not certainly done with. The new high in the Dow yesterday shows that prices are still extending. Wave a was 4 weeks so we have an other 2-3 weeks before world markets are done.

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US 10 year T notes

US markets maybe up but the FED has sparked a rise in yields here. If it breaks out now this time might just be the start of a bigger move up in interest rates. The last few attempts have failed bur recently sentiment reached an extreme with 91% bulls on the 30 year bonds. So a jump in yields does lie ahead. It might not spook markets right away, but only after they rise beyond some inflection point. But it needs watching as an active source of risk.

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Dow Transports

While I have been exploring bullish alternatives in US/European indices, the side kicks have not been doing so well. The Russel or the Dow Transports below have fallen pushing their daily momentum indicators back to a sell. The Dow Transports can be marked as a-b-c up complete as well. So has the next major leg down started here already? It would be a first lead indicator. The Transports was leading the previous decline as well for months before the Frontline indices gave up so it could be an advance warning. 

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