book

Trading with Intermarket Analysis

Name: Trading with Intermarket Analysis
Author: John J. Murphy
ISBN: 9781119210016

by John J. Murphy

October 2015

Intermediate to advanced

256 pages

8h 7m

English

Wiley

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Cover
Half Title Page
Title Page
Copyright
Dedication
Contents
Acknowledgments
Introduction
Part I: The Old Normal
Chapter 1 Intermarket Analysis: The Study of Relationships
All Markets Are RelatedAsset Allocation StrategiesETFs Have Revolutionized Intermarket TradingSector Rotation and the Business CycleStocks Peak and Trough before the EconomyThe Role of OilAdvantages of Using ChartsViewing the Big Picture Is ImportantIntermarket Implications for Technical AnalysisA New Dimension to Technical WorkIntermarket Work Is an Evolutionary StepWhy Relationships ChangeIntermarket PrinciplesReview of the Old Normal

Chapter 2: Review of the Old Normal
1980 Was a Key Turning PointThe End of the Inflationary 1970sThe 1987 Crash Reinforced Intermarket TrendsThe Two Iraq WarsThe 1994 Stealth Bear Market Follows Intermarket ScriptEchoes from the 1930sThe Japanese Bubble Bursts in 1990
Chapter 3 The 1997–1998 Asian Currency Crisis
The Asian Currency Crisis Starts in 1997Bonds and Stocks Start to Decouple1997 and 1998 Were Only a Dress RehearsalIntermarket Lessons of 1997 and 1998The Asian Effect Overrides the FedTwo Deflationary Events of the 1990sDeflationary Effect on Bond YieldsJapanese Deflation and U.S. Interest RatesSummary
Part II: The 2000 and 2007 Tops
Chapter 4: Intermarket Events Surrounding the 2000 Top
Events Leading up to the 2000 TopCrude Oil Triples in PriceA Rise in Short-Term Rates Leads to an Inverted Yield CurveREITs Benefit from Falling StocksConsumer Staples Start to OutperformMarket Lessons from 2000Bonds, Stocks, and Commodities Peaked in the Proper OrderThe 2002 and 2003 Bottoms Reverse Normal OrderThe Fed Discovers Deflation during 2003Commodities Turn Up during 2002
Chapter 5: The 2002 Falling Dollar Boosts Commodities
Commodities InflateCommodities Gain from Battle against DeflationThe Dollar Drop Leads to a New Bull Market in GoldFalling Stocks Are Also Good for GoldNot a Lot of AlternativesGold and the Dollar Experience Major Trend ChangesShifting from Paper to Hard AssetsThe Stock Peak Coincides with Gold BottomGold Breaks 15-Year Resistance LineStocks End Secular UptrendGold Outperforms Stocks for the First Time in 20 YearsThe Oil Peak Coincides with the 2003 Stock Bottom
Chapter 6: Asset Allocation Rotations Leading to 2007 Top
Relative Strength between Asset ClassesAsset Allocation2002 Shift from Paper to Hard AssetsThe Commodity/Bond Ratio Also Turned UpTurns in the Bond/Stock RatioThe 2007 Bond/Stock Ratio Shifts Back to BondsBonds Rise as Stocks Fall During 2007Falling U.S. Rates Hurt the DollarThe Falling Dollar Pushes Gold to a Record HighThe Three Markets Peaked in the Right OrderNo Such Thing as Global Decoupling
Chapter 7: Visual Analysis of the 2007 Market Top
Combining Traditional Charting with Intermarket WarningsThe NYSE Advance-Decline Line Shows Negative DivergenceWhat Caused the Divergence?Rising Oil Hurts Transportation StocksThe Dow TheoryConsumers Are Also Squeezed by Rising OilRetailers and Homebuilders Were LinkedRetail Stocks Start to Underperform Long before 2007The 2005 Homebuilding Top Gave Early WarningAnother Bearish Warning During 2007Why Breadth Measures WorkSummary
Part III: The Business Cycle and ETFs
Chapter 8: Intermarket Analysis and the Business Cycle
The Four-Year Business CycleThe Presidential CycleThe Business Cycle Explains Intermarket RotationLessons from 2000 and 2007Oil Leads to Higher Rates from 2004 to 2006The 2001 Fed Easings Didn’t WorkComparisons to the 1920s and 1930sRotating Asset Classes over DecadesLessons of Long CyclesThe Kondratieff WaveDividing a Lifetime Cycle into SeasonsHousing Is Interest Rate SensitiveReal Estate Doesn’t Always Follow RatesReal Estate Doesn’t Always Follow InflationThe 18-Year Real Estate CycleThe Real Estate Peak Was OverdueEconomic Cycles Set the Framework for Intermarket Work
Chapter 9: The Impact of the Business Cycle on Market Sectors
Sector Rotation within the Business CycleSector Rotations during 2000 Favored ContractionSector Rotations during 2003 Favored ExpansionTechnology Leadership Is Another Good SignSmaller Stocks Lead at BottomsTransportation Leadership2007 Sector Rotation Showed WeaknessSector Rotation Has Two SidesIt’s Also a Market of GroupsThe Difference between Sectors and Industry GroupsSector Rotation ModelSector Rotations during 2007Industry Group LeadershipSector Rotations Turn Positive in 2009Sector Trends Need to Be Monitored2011 Rotations Follow Sector Rotation ModelPerformance BarsUsing Sector Carpets to Find Leading StocksComparing Absolute and Relative PerformanceSectors Are an Important Part of Intermarket WorkThe Emergence of Exchange-Traded Funds
Chapter 10: Exchange-Traded Funds
Mutual Funds versus ETFsTop ETF ProvidersStock Market ETFsBond ETFsCommodity ETFsCurrency ETFsTrading the DollarForeign ETFsInverse and Leveraged ETFsSummary
Part IV: The New Normal
Chapter 11: The Dollar and Commodities Trend in Opposite Directions
Both Markets Need to Be Analyzed TogetherThe Rising Dollar Contributed to the 1997–1998 Commodity CollapseThe Falling Dollar from 2002 to 2008 Pushed Commodities HigherThe Dollar Bottom during 2008 Contributed to Commodity PlungeDollar Peaks in 2009 and 2010 Lifted CommoditiesThe Dollar Bottom in 2011 Pushed Commodities LowerCorrelation CoefficientGold Isn’t Like Other CommoditiesCommodities Are Linked to Foreign CurrenciesGold Outperforms the EuroGold Outpaces Other CommoditiesGold versus Foreign CurrenciesThe Dollar’s Impact on Other Intermarket Trends
Chapter 12: Stocks and Commodities Become Highly Correlated
Another Side Effect of the Deflationary EnvironmentCommodities Lost Half Their Value in Just Six MonthsStock and Commodities Became Closely Correlated after 2008Copper Influences Stock Market DirectionThe Silver/Gold Ratio Influences the Stock MarketSilver Stocks Led Commodity Lower during 2011The Influence of Commodities on Sector PerformanceCommodities Led Stocks Lower during 2011The Commodity Peak Also Influenced Sector RotationsGold Stocks versus GoldGold Miners Are StocksGold Shares Underperform Bullion during 2011Gold and Miners Relink during JulyDollar Direction Impacts Foreign Stocks
Chapter 13: Stocks and the Dollar
A Weak Historic Link between the TwoA Long-Term Comparison of Stocks and the DollarStocks and the Dollar Become Negatively CorrelatedThe Commodity Impact on the Dollar-Stock LinkThe Dollar Bottom during 2011 Hurts StocksThe Dollar Impact on Foreign StocksCommodities Are Linked to Emerging MarketsChina Influences Copper TrendChinese Stocks Influence the S&P 500Europe Is Also ImportantCurrency Trends Impact Foreign ETFs MoreFrance iShares Hold 2010 SupportEMU iShares Diverge from EuroEAFE and Emerging iShares Stabilize at End of 2011Don’t Forget about CanadaThe Canadian Dollar versus the EuroCanadian Markets and CommoditiesHow to Add the Americas to Your Foreign Portfolio
Chapter 14: The Link between Bonds and Stocks
The Two Markets Compete for Investor FundsThe Positive Correlation between Bond Yield and StocksBond Yield Leads Stocks Lower during 2010 and 2011The Falling Bond Yield Boosts Dividend-Paying StocksConsumer Staples and Utilities Thrive on Rising VolatilityNot All Bonds Are the SameSome Bond Prices Can Trend in Opposite DirectionsQuantitative EasingThe Impact of Quantitative Easing on Bonds and StocksOperation TwistThe Yield CurveThr Impact of Quantitative Easing on the Yield CurveBond Yield and Stocks Diverge at the Start of 2012TIPS and Gold Rise TogetherThe Pendulum Swings Back to Stocks at the Start of 2012The Fed Launches QE3
Chapter 15: The Link between Bonds and Commodities
One of the Traditional RelationshipsBond and Commodity Prices Normally Trend in Opposite DirectionsThe Inverse Bond-Commodity Link between 2003 and 2006Why They Changed during 2007Copper versus Corn during 2002A Comparison of Copper and Treasury Bond PricesThe Copper Bottom during 2009 Contributed to the Bond TopThe Thomson Reuters/Jefferies CRB IndexThe CRB Index/Treasury Bond RatioThe Commodity/Bond Ratio Since 2008The CRB/Bond Ratio Influences StocksThe History of Commodity/Bond Ratio Influence on StocksThe CRB/Bond Ratio Also Influences Sector RotationThe CRB/Bond Ratio also Influences Emerging MarketsCommodity Inflation versus Bond DeflationCommodity and Bond Links to China and JapanSummary
Conclusion
Recap of Intermarket PrinciplesThe New Normal in Intermarket RelationshipsFed Policy May Be Interfering with Normal Bond/Stock RelationshipThe Fed Also Kept Bond Yields Low during the 1940sAsset Allocation Strategies May Start Favoring StocksThe Nasdaq/Bond Ratio May Be BottomingThe Nasdaq Composite Index Hits a 12-Year HighBanks Show New LeadershipHomebuilders BottomAdding a New Dimension to Technical AnalysisReading Up on ChartingStockCharts.com Chart SchoolNeural NetworksLooking AheadA Dollar Bottom Would Have a Depressing Effect on CommoditiesA 40-Year Trend of the CRB IndexThe Stock/Commodity Ratio Favors Stocks over CommoditiesTrade trends, not opinions
About the Author
Index

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PART IV

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Trading with Intermarket Analysis

by John J. Murphy

PART IV

THE NEW NORMAL

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.