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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

Final note for today - this remains the most important indicator near term to watch. US bond yields. Just ahead of the FED meet it might appear under pressure, but wave wise it has bottomed and rallied in 5 waves and fallen in 3 waves. This is the first sign of an uptrend. After a 78.6% retracement in wave ii, a third wave to new highs [lower yields] is coming which usually causes a risk off trade. Prices should go above the inverted head and shoulders neckline in the coming weeks.

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US 10 year T Notes

Yesterday I considered wave ii complete for the US 10 year however wave ii is still forming and wave iii as not started as yet.

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US 10 year T Notes

US 10 year completed a wave ii dip to 66% retracement and started higher. Expect US Bond yields to drop sharply in the coming week. The bearish view on US Notes has reached an extreme and now in wave iii up we should see a lot of short covering. The chart also shows a head and shoulders bottom with the neckline at 125.4 for this contract. When bonds rally US stocks come under pressure due to the risk off trade so watch out for that possibility.

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This next chart of the Dow and Notes together may appear more compelling

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