Trading with Intermarket Analysis: A Visual Approach to Beating the Financial Markets Using Exchange-Traded Funds

In Trading with Intermarket Analysis, John J. Murphy, former technical analyst for CNBC, lays out the technical and intermarket tools needed to understand global markets and illustrates how they help traders profit in volatile climates using exchange-traded funds. This book provides advice on trend following, chart patterns, moving averages, oscillators, spotting tops and bottoms, using exchange-traded funds, tracking market sectors, and the new world of intermarket relationships, all presented in a highly visual way.

Introduction:

This book will review events since 2000 with a view toward demonstrating that the threat of deflation throughout the past decade has dominated most intermarket relationships, as well as Federal Reserve policy. The start of the commodity boom during 2002 was the direct result of the Fed’s devaluation of the U.S. dollar in an attempt to stem deflationary pressures (a technique that was also tried during the 1930s). One of the most important intermarket changes that will be described has to do with the changing relationship between bonds and stocks, which decoupled in the years after 1998. In the decades before 1998, rising bond prices supported rising stock prices. Starting in 1998, however, rising bond prices hurt stock values, which was a new phenomenon that became painfully evident from 2000 to 2002 during the worst stock plunge since the Great Depression, and again during the 2008 financial collapse.

A second intermarket change has been the increasingly close linkage between stock and commodity prices since the bursting of the housing bubble during 2007, which was also reminiscent of the deflationary 1930s. Since 2008, stocks and commodities have trended pretty much in lockstep. That’s because both are tied to global economic trends. The events surrounding the 2008 market meltdown reinforced another economic lesson having to do with the link between markets and the economy. The stock market is a leading economic indicator. Stocks usually peak and trough ahead of the economy. The Great Recession following the housing collapse started in December 2007 (three months after stocks peaked) and ended in June 2009 (three months after stocks bottomed). It was also the longest and deepest economic downturn since the Great Depression of the 1930s. No wonder the Fed started to use the same playbook that was used back in that earlier era.

Intermarket analysis is very visual. Although the relationships described herein are based on sound economic principles, and are backed up by correlation statistics, my approach relies heavily on being able to see those relationships on price charts. As a result, you’re going to see a lot of charts. The use of color graphics in this edition will make those comparisons a lot easier to see and a lot more striking. Rest assured that you won’t have to be a chart expert to understand the charts. All you’ll need is the ability to tell up from down. And an open mind.

Contents:

• Intermarket Analysis: The Study of Relationships
• Review of the Old Normal
• 1998 Asian Currency Crisis
• Intermarket Events Surrounding the 2000 Top
• The 2002 Falling Dollar Boosts Commodities
• Asset Allocation Rotations Leading to the 2007 Top
• Visual Analysis of the 2007 Market Top
• Intermarket Analysis and the Business Cycle
• The Impact of the Business Cycle on Market Sectors
• Exchange-Traded Funds
• The Dollar and Commodities Trend in Opposite Directions
• Stocks and Commodities Become Highly Correlated
• Stocks and the Dollar
• The Link between Bonds and Stocks
• The Link between Bonds and Commodities

Trading with Intermarket Analysis: A Visual Approach to Beating the Financial Markets Using Exchange-Traded Funds By John J. Murphy pdf