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Intermarket Analysis Resources?

  #5 (permalink)

North Carolina
Posts: 6 since Dec 2009
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For example, I'm currently projecting short term upward action in stocks AND commodities, with agricultural being particularly strong among the commodities. So I'm long the agricultural sector ETF PAGG.

Let's say, I was projecting stocks downward and interest rate yields up. I would then look to short interest rate sensitive sectors, like utilities. That sort of thing.

Where intermarket analysis came in for the PAGG play is The dollar appears to be bouncing off of major resistance at 89 and the euro off major support at 1.18. If the dollar corrects here, I would imagine that would be bullish for both stocks and commodities.

Here's more on how I used inter-market analysis for this play:

While stocks corrected pretty strongly since late april, putting in a low (the flash crash) and then a lower low (down to 1050 on the S&P), corporate bonds have been much stronger. As measured by the ETF LQD, they did not put in a lower low, and the price is still very high on a long term chart. You have to go back 5 years before you start seeing highs that are significantly higher than LQD's current price. In other words, current corporate bond price is supportive of a move higher in stocks.

I also use relative strength strength analysis, as described by Murphy. Looking at the relative strength of the ratios pagg/spx and pagg/rji (I use the etf rji as my gauge of commodities in general), while pagg was putting in a double bottom, in both cases the ratios were putting in higher lows, were breaking above downward sloping trend lines, and breaking above moving averages of the ratio. In other words, relative strength was giving entry signals.

Finally China, which has been leading US markets of late, put in a higher low and higher high, suggesting that US equities should break out of their current trading range to the upside.

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