Intermarket Analysis – Questions Answered

Lets go through these one at a time.

Some time ago I had you take a look at the symbol “TLT”  which tracks the value of the 20 year U.S treasury bond. When we start to see bond prices falling – it’s likely that stocks are not far behind. Keep in mind this is a WEEKLY chart, so the trend demands considerable respect.

Please remember – these “big ships” take weeks to turn – and this kind of macro intermarket analysis does not produce an immediate “buy or sell” signal.

It would be my view that regardless of short-term action/volatility – it would take a “considerable move” to actually reverse the weekly downtrend in TLT. Hence – the required “precursor” to lower stock prices No?

Lets look at the Commodities Index.

We’ve taken a real beating here – but this sets things up quite perfectly for another “intermarket dynamic” we’ve come to learn. When the “price of stuff” starts climbing higher ( or possibly “rockets” higher ) – what direction is USD moving ? (as commodities are priced in USD) You’ve got it – Commods up = USD down.

Here is a previously posted chart of the SP500 – and the obvious area of resistance. I can’t really add much more in that – I believe the easy gains in U.S equities have now passed and for the most part from here on in – it may trade flat to down, with little chance of doing more for your account than grinding it to pieces.

Stocks will get volatile and create the illusion (many times over) that further gains are in the cards, drawing in as much new money as possible while grinding sideways. Short of being a “master stock picker” like the fellows over at Ibankcoin.com – I can only suggest being cautious…very, very cautious.

Finally the U.S Dollar.

Not much else to add here as the intermarket analysis above pretty much outlines the direction for the U.S Dollar. I feel we will likely see a time very soon, when U.S bonds, U.S stocks as well as the U.S Dollar all fall together.

Ideas on how to play it? Let’s look at those next.

Strategic Plays for the Coming Market Shift

Currency Pairs Positioned for the Triple Fall

When bonds, stocks, and the dollar all decline simultaneously, we’re looking at a fundamental shift in global capital flows. This creates specific opportunities in the forex market that smart traders need to identify now. The EUR/USD becomes particularly interesting here – not because the Euro is fundamentally strong, but because dollar weakness will likely drive this pair higher regardless of European economic conditions. Look for breaks above 1.0850 as confirmation that dollar selling is gaining momentum.

More compelling is the setup in commodity currencies. AUD/USD and NZD/USD should benefit from both sides of this trade – rising commodity prices supporting the commodity currencies while dollar weakness provides the tailwind. The Canadian dollar presents an even cleaner play through USD/CAD shorts, as Canada’s resource-heavy economy gets a double boost from higher oil and metals prices. Watch for USD/CAD to break below 1.3400 as the signal that this intermarket relationship is firing on all cylinders.

The Japanese Yen Wild Card

Here’s where it gets interesting. Traditionally, yen strength accompanies U.S. market turmoil as investors flee to safety. But we’re not in a traditional environment. The Bank of Japan’s yield curve control and massive monetary stimulus create a unique dynamic. If global bond yields are falling while the BOJ maintains its ultra-loose policy, USD/JPY could actually hold up better than other dollar pairs – at least initially.

However, if we see genuine risk-off sentiment emerge from falling stocks and bonds, expect the yen to eventually assert its safe-haven status. The key level to watch is 140.00 in USD/JPY. A break below this level while the other intermarket signals are firing would confirm that even the BOJ’s intervention efforts can’t hold back traditional capital flight patterns. This would open the door to significant yen strength across the board.

Gold and the Inflation Hedge Revival

Rising commodity prices with falling bonds creates the perfect storm for gold. We’re talking about real inflation pressures building while bond yields potentially decline – a scenario that historically sends gold parabolic. But here’s the trader’s dilemma: gold priced in dollars might rise, but gold priced in other currencies could explode higher.

This is where currency selection becomes crucial. Holding gold exposure through Euro or British Pound denominated positions could amplify gains if dollar weakness accelerates. The key insight most traders miss is that gold’s performance isn’t just about supply and demand for the metal – it’s about which currency you’re measuring that performance in. When multiple fiat currencies are under pressure simultaneously, gold becomes the ultimate beneficiary.

Timing the Trade Setup

The weekly timeframes we’re analyzing don’t provide precise entry signals – they provide directional bias for position sizing and risk management. The actual triggers will come from daily and 4-hour charts when these macro themes begin to accelerate. Watch for synchronized breaks: TLT falling through key support, commodities breaking multi-month resistance, and stock indices failing at obvious technical levels.

The beauty of intermarket analysis is that it gives you conviction to hold positions through short-term noise. When you understand that falling bond prices must eventually pressure stocks, and that rising commodity prices must eventually weaken the dollar, you can ride the intermediate-term moves that create real wealth. Most retail traders get shaken out of winning positions because they don’t understand the bigger picture forces at work.

Position sizing becomes critical here. These macro moves can take months to fully develop, and there will be violent counter-trend moves designed to shake out weak hands. The institutions know retail traders are watching these same charts, and they’ll create false breakouts and temporary reversals to accumulate positions at better prices. Your job is to stay focused on the weekly trends and use daily charts only for timing entries, not changing your directional bias.

The setup is clear: bonds falling, commodities rising, stocks topping, dollar weakening. The only question remaining is whether you’ll have the patience and position size discipline to profit from what appears to be a significant shift in global market dynamics.