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?


TLT in Weekly Downtrend

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.


Commodities Set To Rise

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 – I can only suggest being cautious…very, very cautious.



Finally the U.S Dollar.


The U.S Dollar Also Set To Fall

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.

9 Responses

  1. schmederling April 20, 2013 / 8:44 pm

    That one is easy – commode’s down the line….. We could very well see the Market correct & the dollar fall together.

    The fundo’s do not support the DXY or the Markets but do support higher Commod’s – if anyone thinks things are improving from the US to Europe I would take a second look. The US is joined at the hip with most of Europe, toxic derivatives sold to Greece, Italy & other I am sure as the greedy spread to new territories once the US was all scammed out.

    It’s no secret some 7 trillion was provided to banks across the board to keep things going – now Cyprus, & other face haircuts with the cancer already planned into the 2013 Canadian budget.

    Does this mean it happens tomorrow? NO,….. next week or month… who knows. If this was my party, you can bet your hard earned trading dollars I would be pulling out all the stops, trick & sleight of hand tactics to keep the game going.

    In the interim – one needs to be nimble, quick footed & not married to any single position in and sector. 2013 for me is all about survival and still trying to make a living while keeping capital intact taking first priority over making money.

    Costs can add up quickly, however losses can quickly & easily surpasses any costs one may have.

    That’s where my mind is currently – planning for summer activity & mid to late fall – where will be? What kind of environment will present itself in truth or in sheep’s clothing?

    Cheers Schmed,

    • schmederling April 20, 2013 / 8:50 pm

      But I also think that there is a tone of money to be made if one is in the right place at the right time. The continued transfer of wealth continues as the cycle has played out historically every 30 to 40 years!

    • Forex Kong April 21, 2013 / 9:48 am

      Well said Schmed.

      The central theme moving forward, is most certainly – survival!

      Some of the verbage in Canada’s 2013 budget is scary to say the least, when most Canadians would just consider “It could never happen here!”.

      Wakey wakey! I can’t imagine the people of Cyprus saw this in their minds eye either.

      This is the begininng of something bad – not the end.

      • schmederling April 21, 2013 / 11:14 pm

        Thanks Kong – Great call on the TSX….. S&P next…… LOL… I have DOG positions for over a month now…. adding on the Dips.. Just a little insurance if this taken us by suprise which I am sure it will.

        Cheers Schmed,

        • Forex Kong April 22, 2013 / 8:18 am

          Thanks Schmed.

          Fundamentally speaking – things are certainly moving in the “proposed direction” with slower growth (if only a touch) out of China, as well most U.S companies guidance looking grim ( CAT missing here this morning is in my view another indication of things to come ) but – “as per usual” stocks still trudging along…..stubborn, very stubborn.

  2. tio April 21, 2013 / 6:29 am

    some month in middle march ’13, there’s unusual correlation with USD and CRB CCI also move down in tandem. Usually dollar index (USD) and complex commodity index move opposite BUT not always. When both move in tandem, what it mean to us ? ……… and i feel vey strange ahead Kong, i just don’t know why ..
    thanks for great blog

    • Forex Kong April 21, 2013 / 9:53 am

      Just stay safe for now Tio – a month goes by….a couple months go by – no big deal.

      As with my analysis being so “macro” – all these factors don’t play out “minute to minute” – so keep that in mind, and stick to the fundamentals. I hear/read of many other blog considering “deflation” ahead ( meaning things get cheaper/dollar rises ) and no matter how hard I try to stay “open to different ideas” – the idea of “stuff getting cheaper” sounds completely absurd.

      This in itself “should” keep us on the right track , as a fundamental “guiding light” moving forward.

      The timing is always the difficult part.

Leave a Reply