I'm very interested in intermarket relationships and finding leading indicators that have been proven to be consistent. Using John Murphy's Intermarket Analysis framework, I'm seeing a lot of his leading indicators on display to lead me to believe the equity market is finally reaching its peak for this cycle.
Based on this chart http://ift.tt/2wm70fL] I'm seeing a few key principles on display that Murphy has defined as leading indicators:
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"A falling dollar only hurts bonds and stocks when commodities are rising": Here we are seeing the dollar in one of its longest slumps in recent history. Commodities and the dollar were falling together, but since mid-June we see a significant rally in commodities while the dollar continues to fall - leading to the early September spike downward in bond prices.
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"Commodity prices turn up before bond prices turn down": again, notice commodity prices rallying from a trough in mid-June before bonds began their fall in early September.
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"A sharp rise in gold or oil is an immediate warning to bond traders and an early warning to stock traders" - there's no surprise that the commodities index is largely tied to oil - and, in fact, we see the CRB and USOIL turn up at the exact same point in June
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"Bonds peak and trough ahead of stocks": on 9/8 we see bonds and stocks start to really drift away from each other.
Murphy also states that "turns in the bond market usually precede turns in the stock market by several months" so while bonds may have peaked - it could take months for stocks to follow.
Submitted September 28, 2017 at 01:13PM by PiggNetti http://ift.tt/2xEE5oq
