Trading with Intermarket Analysis

INTRODUCTION

My first book on this subject, entitled Intermarket Technical Analysis: Trading Strategies for the Global Stock, Bond, Commodity, and Currency Markets (Wiley & Sons), was published in 1991. The reason I wrote the book was to demonstrate that all global financial markets are closely linked and have an impact on each other. The book’s main thesis was that technical analysts needed to broaden their chart horizon to take these intermarket relationships into consideration. Analysis of the stock market by itself, for example, was incomplete without taking into consideration existing trends in the dollar, bond, and commodity markets. That first book suggested that financial markets could often be used as leading indicators of trends in related markets or, at the very least, could provide confirmation (or nonconfirmation) of other existing trends.

Because the message of that earlier text challenged the single market focus of the technical community, some professional chartists questioned whether this newer and broader intermarket approach had any place in the technical field. Many questioned whether intermarket relationships existed at all or, if they did, whether they were consistent enough to provide any forecasting value. A paper on the subject that I once submitted to the Market Technicians Association (MTA) was rejected due to lack of proof. The seemingly revolutionary idea that all global markets are linked, and that American analysts could gain some edge by following ...