2 FINANCIAL MARKETS AND THE BUSINESS CYCLE

Introduction

Our principal objective here is to explain the benefits of the technical approach, but it is also important to understand that primary trends of stocks, bonds, and commodities are determined by the attitude of investors toward unfolding events in the business cycle. Each market has a tendency to peak and trough at different points during the cycle in a consistent, chronological manner. An understanding of the interrelationship of credit, equity, and commodity markets provides a useful framework for identifying major reversals in each.

The Discounting Mechanism of Financial Markets

The primary trend of all financial markets is essentially determined by investors’ expectations of movements ...

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