Intermarket Analysis: Profiting from Global Market Relationships

CHAPTER 15

Thinking Globally

ALL MARKETS ARE RELATED

When I wrote my earlier book on intermarket technical analysis 13 years ago, my purpose was to demonstrate the simple reality that all markets are related. When I first made the claim in 1990, it seemed a little far-fetched. In the new millennium, however, many of the relationships that I described in the earlier book are taken for granted. The link between bonds and stocks is analyzed daily in the financial press and on TV. Intermarket subjects like the impact of a falling dollar on gold are routinely discussed on Bloomberg TV and CNBC. Economists debate the seriousness of the deflation threat and the impact that it could have on the financial markets. I heard one international analyst talking on television the other day about global opportunities in the dollar bloc countries like Australia and Canada because of their higher interest rates and strong currencies. Another analyst discussed the benefits that rising commodity prices could bring to emerging markets. This is pretty sophisticated stuff. We have all come a long way since 1990 in our awareness of how any market in the world has an impact on many others. Traders have also learned how to profit from these impacts.

The idea that all global markets are linked in some fashion seems obvious today. If you tune into Bloomberg radio early in the morning, you will get price quotes on key commodities like gold and oil, foreign currencies, foreign bonds, and foreign stock markets. ...