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Intermarket Analysis: Profiting from Global Market Relationships

Name: Intermarket Analysis: Profiting from Global Market Relationships
Author: John Murphy
ISBN: 9780471023296

by John Murphy

January 2004

Beginner

288 pages

6h 56m

English

Wiley

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Title Page
Copyright
Dedication
Acknowledgments
Introduction
EARLIER BOOK COVERED THE 1980sJAPANESE BUBBLE BURSTS IN 1990THIRD ANNIVERSARY OF 2000 MARKET TOPTHE DEFLATION SCENARIOINTERMARKET MODEL FROM 1980 TO 1997THEN CAME 1998 AND THINGS CHANGEDTHE ROLE OF OILTHE RESURGENCE OF GOLDASSET ALLOCATION AND ECONOMIC FORECASTINGIMPORTANCE OF CHARTS
CHAPTER 1 - A Review of the 1980s
COMMODITIES PEAK IN 1980DOLLAR BOTTOMS IN 1980BONDS BOTTOM IN 1981STOCKS BOTTOM IN 1982HOW THE FOUR MARKET GROUPS INTERRELATE1987 STOCK MARKET CRASH REVISITEDCOMMODITIES RISE, BONDS FALL DURING SPRING OF 1987STOCK MARKET PEAKS IN AUGUSTDOLLAR FALLS WITH STOCKSTHE 1987 MARKET CRASH WAS GLOBALLATER EXAMPLES OF GLOBAL LINKAGESTHE DOLLAR’S IMPACT CAN BE DELAYEDONWARD AND UPWARD TO 1990
CHAPTER 2 - 1990 and the First Persian Gulf War
BONDS TURN DOWN IN EARLY 1990CRB TURNS UP IN EARLY 1990BONDS AND STOCKS DIVERGEGLOBAL MARKETS DON’T CONFIRM U.S. RALLYIRAQ INVADES KUWAIT IN AUGUSTOIL AND GOLD SOAREVERYTHING REVERSES AT THE START OF WAR1990 DIVERGENCE BETWEEN OIL AND OIL SHARESTHE IMPORTANCE OF $40 OILINTERMARKET LESSONS LEARNED DURING 1990COMPARISONS BETWEEN 2003 AND 1991JAPAN NEVER RECOVERS
CHAPTER 3 - The Stealth Bear Market of 1994
THINGS LOOK GOOD FROM 1990 THROUGH 1993A DESCRIPTION OF THE CRB INDEXTHE CRB INDEX TURNS UP IN EARLY 1993WATCH INDUSTRIAL PRICESTHE JOURNAL OF COMMERCE (JOC-ECRI) INDEXGOLD AND OIL ARE ALSO IMPORTANTGOLDMAN SACHS COMMODITY INDEXBONDS PEAK AHEAD OF STOCKSTHE STEALTH BEAR MARKETA LOSS FOR UTILITIES IS A GAIN FOR METALS IN 1994INTERMARKET PICTURE REVERSES IN 1995THE CRB/BOND RATIOBONDS AND STOCKS RISE TOGETHER UNTIL 1998
CHAPTER 4 - The 1997 Asian Currency Crisis and Deflation
ASIAN CURRENCY CRISIS STARTS IN 1997BONDS AND STOCKS START TO DECOUPLETHE DEFLATION SCENARIO1997 AND 1998 WERE ONLY A DRESS REHEARSALINTERMARKET PICTURE DURING 1997 AND 1998THE DOLLAR VERSUS COMMODITIESHONG KONG AND INDUSTRIAL METALS PEAK TOGETHERCOMMODITIES VERSUS BONDSBONDS VERSUS STOCKSBONDS AND STOCKS DIVERGE IN 1998THE CRB/BOND RATIO AND SECTOR ROTATIONCONSUMER VERSUS CYCLICAL STOCKSCRB/BOND RATIO COLLAPSES DURING 1997RELATIVE STRENGTH ANALYSISPLOTTING A RATIO OF TWO COMPETING SECTORSINTERMARKET LESSONS OF 1997 AND 1998
CHAPTER 5 - 1999 Intermarket Trends Leading to Market Top
1999 SEES REVERSAL OF 1998 TRENDSCOMMODITIES JUMP AT START OF 1999COMMODITIES AND RATES TREND TOGETHERINDUSTRIAL COMMODITIES AND OIL BOTTOMTHE IMPACT OF RISING RATES ON STOCKSNYSE ADVANCE-DECLINE LINE FALLS IN 1999INTERMARKET SECTOR EFFECTRISING CRUDE WAS GOOD FOR OIL SHARESTRANSPORTATION STOCKS FALL HARDFINANCIAL STOCKS LOSE FAVOR DURING 1999OTHER SECTOR INFLUENCESSECTOR ROTATION AND THE ECONOMYGLOBAL INFLUENCES IN 1999HONG KONG AND SEMICONDUCTORSTHE AUSTRALIAN DOLLAR AND COMMODITY PRICES

CHAPTER 6 - Review of Intermarket Principles
INTRODUCTIONAN EVOLUTIONARY STEP IN TECHNICAL ANALYSISEMPHASIS ON SECTOR WORKASSET ALLOCATION STRATEGIESTHE BASIC PREMISE OF INTERMARKET ANALYSISGLOBAL MARKETSGLOBAL SECTOR TRENDSJAPAN’S EFFECT ON U.S. MARKETSJAPAN EFFECT OVERRIDES THE FEDECONOMIC LESSONSTHE TECHNICAL NATURE OF INTERMARKET ANALYSISADVANTAGES OF CHARTING—THE BIG VIEWECONOMIC FORECASTINGMARKETS ANTICIPATE ECONOMIC TRENDSTHE ROLE OF THE DOLLARGLOBAL IMPACT OF CURRENCY TRENDSDOLLAR IMPACT ON MULTINATIONALSMCDONALDS AND PROCTER & GAMBLE PROFIT FROM WEAK DOLLARDOLLAR IMPACT ON DRUG STOCKSSMALL STOCKS ARE DOMESTICWEAK DOLLAR ALSO HELPS SERVICE STOCKSRECAP OF INTERMARKET PRINCIPLES
CHAPTER 7 - The Nasdaq Bubble Bursts in 2000
AN HISTORIC YEARINVERTED YIELD CURVE IMPLIES ECONOMIC WEAKNESSTHE WARNING SIGNS WERE THERE ON THE CHARTSSEEING THINGS AS THEY HAPPENJANUARY 30, 2000: YIELD CURVE INVERSION1969 ALL OVER AGAIN?JANUARY LOWS BROKENCASH IS GOODAPRIL 15, 2000: NASDAQ BREAKS MOVING AVERAGE LINE-NYSE FAILUREREITS HOLD UPREITS SHOW GOOD RELATIVE STRENGTHREIT INDEX TURNS UPAPRIL 21, 2000: MARKET’S ECONOMIC MESSAGE—ECONOMIC SLOWINGCOPPER AND LONG RATES PEAK TOGETHER AT START OF 2000ECONOMIC WEAKNESS FAVORS CONSUMER STAPLESCONSUMER STAPLES START TO OUTPERFORMTHINGS COULD NOT BE BETTERAUGUST 11, 2000: SHIFT TO VALUESECTOR ROTATION WITHIN THE ECONOMIC CYCLEWHY IT IS BAD WHEN ENERGY AND CONSUMER STAPLES ARE STRONGNOVEMBER 10, 2000: IT’S THE ECONOMYTWOFOLD USE OF SECTOR ROTATION DIAGRAMTHE LESSONS OF 2000
CHAPTER 8 - Intermarket Picture in Spring 2003
FLIGHT TO GOLDBONDS AND COMMODITIES TREND IN OPPOSITE DIRECTIONSSEPTEMBER 11 REVERSALSCOMMODITIES FOLLOW THE LEAD OF STOCKSSTOCKS LEAD COMMODITIES HIGHERBOND AND STOCK PRICES TREND IN OPPOSITE DIRECTIONSSEPTEMBER 11 REVERSES TRENDSFALLING STOCKS ARE GOOD FOR GOLDMAY 22, 2002: MAJOR DOLLAR TOP IN THE MAKINGFALLING DOLLAR IS BULLISH FOR GOLDGOLD STOCKS SHINEONE YEAR LATER: THE FED DISCOVERS DEFLATIONLETTING THE DOLLAR FALL
CHAPTER 9 - Falling Dollar During 2002 Boosts Commodities
COMMODITIES INFLATEDOLLAR PEAK COINCIDES WITH COMMODITY BOTTOMBONDS AND COMMODITIES DECOUPLEWAR PREMIUM PUSHES OIL HIGHERCOMMODITY DIVERGENCE: WEATHER VERSUS THE ECONOMYINDUSTRIAL METALS AND INTEREST RATES TREND TOGETHERCOMMODITY PRICES AND BOND YIELDS NORMALLY TREND TOGETHERASIAN DEFLATION PULLS U.S. RATES LOWERGLOBAL BEARJAPAN PULLING WORLD MARKETS LOWERDEFLATION SCENARIO: U.S. STOCKS AND RATES FALL TOGETHERCOMMODITIES GAIN FROM BATTLE AGAINST DEFLATIONDOLLAR TOP LEADS TO NEW BULL MARKET IN GOLDSWING BACK TO HARD ASSETS?
CHAPTER 10 - Shifting from Paper to Hard Assets
GOLD COMES BACK INTO FAVORGOLD BREAKS 15-YEAR RESISTANCE LINEGOLD TURNS UP AS STOCKS TURN DOWNCOMMODITIES OUTPERFORM STOCKS FOR FIRST TIME IN 20 YEARSWHY 2003 WAS NOT A REPLAY OF 1991CYCLICAL TRENDS VERSUS SECULARHISTORICAL RESEARCH ON CYCLICAL BULLSSECULAR BEAR IN STOCKS IS GOOD FOR GOLDRISING CURRENCY MARKETSTHE FALLING DOLLAR HURTS GLOBAL MARKETSCHINA NOT AFFECTED BY DOLLAR MOVESCOMMODITY CURRENCIES RALLYUSING THE FUTURES MARKETSNOT A LOT OF ALTERNATIVES IN TRADITIONAL MARKETSBUYING COMMODITY-RELATED STOCKS
CHAPTER 11 - Futures Markets and Asset Allocation
RELATIVE STRENGTH ANALYSIS AMONG ASSET CLASSESBONDS VERSUS STOCKSCOMMODITIES VERSUS BONDSTHE DOW/GOLD RATIOINCLUDING COMMODITIES AND CURRENCIESCAN FUTURES PLAY A ROLE IN ASSET ALLOCATION?BUILT-IN ASSET ALLOCATION MODELCHARTS COMPARING FUTURES MARKETS—GOING LONG OR SHORTUSING MANAGED FUTURES ACCOUNTSFUTURES PORTFOLIOS CORRELATE POORLY WITH BONDS AND STOCKSCOMMODITY FUTURES AS AN ASSET CLASSPUSHING THE EFFICIENT FRONTIERTREATING CURRENCIES AS AN ASSET CLASSTHE IMPACT OF A FALLING DOLLARGOLD MEASURED IN FOREIGN CURRENCIESGOLD/CURRENCY RATIOS ARE RISINGGOLD IS STRONGER THAN ALL MAJOR CURRENCIESSUMMARY
CHAPTER 12 - Intermarket Analysis and the Business Cycle
THE FOUR-YEAR BUSINESS CYCLETHE BUSINESS CYCLE EXPLAINS INTERMARKET ROTATIONTHE CHRONOLOGICAL SEQUENCE OF BONDS, STOCKS, AND COMMODITIESBONDS ARE THE FOCAL POINTTHE SIX STAGES OF THE BUSINESS CYCLELESSONS OF 2000BONDS AS A LEADING ECONOMIC INDICATORSTOCKS AND COMMODITIES AS LEADING INDICATORSMORE ON THE JOC INDEXPREDICTING THE 2001 RECESSIONTHE THREE MARKETS FOLLOWED THE PROPER ROTATION FOR TOPSMARKET ROTATIONS DURING THE 1920s AND 1930sCOMMODITIES PEAKED IN 1920BONDS BOTTOM DURING 1920STOCKS BOTTOM DURING 1921BONDS TURN DOWN IN 1928BONDS AND STOCKS DECOUPLE IN 1929—COMMODITIES PLUNGESTOCKS AND COMMODITIES BOTTOM TOGETHER IN EARLY 1930SREFLATING DURING THE 1930sBOND YIELDS SPIKE UP TEMPORARILY IN 1931STOCKS AND COMMODITIES COMPLETE BOTTOMS IN EARLY 1940sROTATING ASSET CLASSES OVER DECADESLESSONS OF LONG CYCLESTHE KONDRATIEFF WAVEDIVIDING A LIFETIME CYCLE INTO FOUR SEASONS
CHAPTER 13 - The Impact of the Business Cycle on Market Sectors
SECTOR ROTATION WITHIN THE BUSINESS CYCLESECTOR ROTATION IN 2000 FAVORED CONTRACTIONANOTHER VIEW OF THE ECONOMIC CYCLESECTOR ROTATIONS DURING 2003 SUGGEST EARLY EXPANSIONSECTOR LEADERSHIP MOVES TO CONSUMERS AND TECHNOLOGYRELATIVE STRENGTH OF CONSUMER SPENDINGRETAIL BUYINGTECHNOLOGY LEADERSHIP IS A GOOD SIGNNASDAQ LEADS MARKET HIGHER DURING 2003TRANSPORTATION LEADERSHIPCYCLICALS STARTING TO OUTPERFORM STAPLESSMALLER STOCKS LEAD AT BOTTOMSSECTOR ROTATION MODELSECTOR ROTATION MODEL SUPPORTING DATAINTEREST RATE TRENDSTHE YIELD CURVEYIELD CURVE FLATTENS DURING 2003ANOTHER VIEW OF THE YIELD CURVE
CHAPTER 14 - Diversifying with Real Estate
LOCATION IS EVERYTHINGTHIS CYCLE HAS BEEN DIFFERENTREITS TURN UP AS NASDAQ PEAKSROLE REVERSALS IN 2000THINGS START TO CHANGE DURING THE SUMMER OF 2002REITS PEAK IN 2002 AS MARKET BOTTOMSREITS UNDERPERFORM AFTER SUMMER OF 2002HOUSING IS INTEREST RATE-SENSITIVEREAL ESTATE DOES NOT ALWAYS FOLLOW INFLATIONREAL ESTATE DOES NOT ALWAYS FOLLOW INTEREST RATESREAL ESTATE DOES NOT ALWAYS FOLLOW STOCKSTHE LONG CYCLE IN REAL ESTATE ACTIVITYCOMPARISON TO OTHER CYCLESSIMILARITIES AND DIFFERENCES: PRESENT DAY AND THE 1930sHISTORY OF REAL ESTATE CYCLE SINCE 1940ARE HOMEBUILDING STOCKS LINKED TO STOCKS OR RATES?HOMEBUILDERS DECOUPLE FROM MARKET DURING 1999HOUSING STOCKS LINK TO INTEREST RATESMARKET ROTATION DURING 2000HOMEBUILDERS AND STOCKS RE-LINKFED’S DEFLATION FIGHT BOOSTS HOUSING STOCKSTHE HOUSING TRADEOFFJAPANESE REAL ESTATE COLLAPSED TWO YEARS AFTER STOCKS
CHAPTER 15 - Thinking Globally
ALL MARKETS ARE RELATEDGLOBAL TRADE INCREASES IMPACT OF EXCHANGE RATESEMERGING MARKETSMORE INTERMARKET EMPHASIS ON SECTOR WORKTHE INTERMARKET MODEL IS NOT STATICBONDS AND STOCKS DECOUPLEWHY WE NEED TO STUDY HISTORYTHE DECADE AFTER MARKET BOOMS ARE NOT VERY GOODINTERMARKET IMPLICATIONS FOR TECHNICAL ANALYSISTHE NEED FOR BETTER PERIPHERAL VISIONINTERMARKET WORK IS AN EVOLUTIONARY STEPTHERE IS STILL A LOT TO LEARN
Appendix
Index

Overview

Praise for INTERMARKET ANALYSIS

"John Murphy has done it again. He dissects the global relationships between equities, bonds, currencies, and commodities like no one else can, and lays out an irrefutable case for intermarket analysis in plain English. This book is a must-read for all serious traders."

-Louis B. Mendelsohn, creator of VantagePoint Intermarket Analysis software

"John Murphy's Intermarket Analysis should be on the desk of every trader and investor if they want to be positioned in the right markets at the right time."

-Thom Hartle, President, Market Analytics, Inc. (www.thomhartle.com)

"This book is full of valuable information. As a daily practitioner of intermarket analysis, I thought I knew most aspects of this invaluable subject, but this book gave me several new ideas. I thoroughly recommend it for beginners and professionals."

-Martin Pring, President of Pring.com and editor of the Intermarket Review Newsletter

"Mr. Murphy's Intermarket Analysis is truly the most efficient and unambiguous way to define economic and fundamental relationships as they unfold in the market. It cuts through all of the conflicting economic news/views expressed each day to provide a clear picture of the 'here and now' in the global marketplace."

-Dennis Hynes, Managing Director, R. W. Pressprich

"Master Murphy is back with the quintessential look at intermarket analysis. The complex relationships among financial instruments have never been more important, and this book brings it all into focus. This is an essential read for all investors."

-Andrew Bekoff, Technical Strategist, VDM NYSE Specialists

"John Murphy is a legend in technical analysis, and a master at explaining precisely how the major markets impact each other. This updated version provides even more lessons from the past, plus fresh insights on current market trends."

-Price Headley, BigTrends.com, author of Big Trends in Trading

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