Intermarket Analysis Aug 4th Week 2016
Am a bit late with this intermarket analysis. I wanted to post it on Monday at the beginning of the trading week. However, was not able to. But anyway, intermarket analysis is very slow moving. Slowly but surely it points to important events happening in the different markets which will affect one another.
For an introduction to this discipline, I highly recommend that you go to stockcharts.com education page on Intermarket Analysis. After you have read this article, you will appreciate more the things that I write here. Otherwise you might be wondering what we are talking about.
I also recommend that you purchase and read John Murphy's book on Intermarket Analysis. You can find it on Amazon here. The blue cover one will do. I think there is a new book by him called Trading Intermarket Analysis. I do not have that one, but having the blue one will be more than enough. For more information, you can check out the other book.
For a shorter term view of what the stock market is doing read my Daily Stock Market Analysis 2016. For past intermarket analysis, go to Intermarket Analysis By Stephen Loke. I recommend that you read the past intermarket analysis up to one month because markets are slow moving in the weekly charts and you may find extra info in my past analysis. I only just started doing this, so I have 2 articles only. As time goes by, we will have more.
Ok. Let's look at what the charts are telling us now.
For an introduction to this discipline, I highly recommend that you go to stockcharts.com education page on Intermarket Analysis. After you have read this article, you will appreciate more the things that I write here. Otherwise you might be wondering what we are talking about.
I also recommend that you purchase and read John Murphy's book on Intermarket Analysis. You can find it on Amazon here. The blue cover one will do. I think there is a new book by him called Trading Intermarket Analysis. I do not have that one, but having the blue one will be more than enough. For more information, you can check out the other book.
For a shorter term view of what the stock market is doing read my Daily Stock Market Analysis 2016. For past intermarket analysis, go to Intermarket Analysis By Stephen Loke. I recommend that you read the past intermarket analysis up to one month because markets are slow moving in the weekly charts and you may find extra info in my past analysis. I only just started doing this, so I have 2 articles only. As time goes by, we will have more.
Ok. Let's look at what the charts are telling us now.
The Big 3 Indices And Major US Indices
The Golden Mode Trend Indicator is one that I arranged it and named it so, because of the golden opportunities that investors and traders can have when stocks and indices are in this mode. To learn more, read The Golden Mode Trend Indicator. This trend following system is very useful in short term analysis (60 min) and longer term analysis (weekly chart) of the stock market.
Sectors
Most sectors have broken out or are breaking out of bullish patterns. When sectors are doing this we are in a true bull market. This gives the stock picker to focus on different sectors and choose stocks within the sector to trade. Often, stocks in a sector tend to run higher and further than the sector indexes.
One thing to take note of is the Energy sector and Oil & gas sector is beginning a stage 2 weekly uptrend. Both of them are breaking out of a weekly box and this can be very good for stocks within the sector.
World Markets
The US indices will influence the direction of the major world markets instead of the other way round. Sometimes, when you look at the markets in other countries, you can get a confirmation of the bull market in the US markets.
The London Footsie is more resilient than you think. After the BREXIT vote crash, it quickly recovered. Technicians who study this market closely and let the charts guide them are not surprised. I wrote a piece titled Why The Stock Market Crashed After BREXIT And Staged One Of The Greatest Bull Run In Recent History and you might find it interesting.
The Shanghai Composite is trying to form a base and start a Stage 2 (uptrend) in the weekly charts. I think there is still a lot of supply to be absorbed after the shocks in the Chinese market. Stage analysis is very useful in intermarket analysis and long term analysis. Read more about it in The 4 Stages Every Stock And Market Goes Through.
The Global Banks index chart shows global banks trying to break out of a long term downtrendline. This is good for bank stocks that have exposure around the world, I guess.
Dollar And Commodities
The dollar has a big impact on commodities. Rising dollar index is bad for commodities while declining and neutral dollar index is conducive for bullish patterns in commodities. You can see how the rise in dollar above coincided with the bear market in oil in 2015. Now that the dollar index is neutral, bullish patterns in commodities are more likely to follow through.
Many people are worried about how the rise in oil prices may affect the stock market. A very long period of high oil prices are going to be bearish for the economy but when oil is having a bear market and about to form a bottom, it is actually bullish for the economy and the stock market. That is why the rise in oil this year coincided with a rise in the stock market.
A rising oil price after a bear market in oil is indicator of demand for oil. A rising demand in the early stages of a bullish move in oil shows that the economy of the world is expanding instead of being a sign of bearishness for the stock market. I don't want to try to be smart here but I think that oil prices that are below $80 can still sustain a bullish stock market.
However, if oil prices rise above $80 and stay high for a very long time, this will affect the economies around the world and be harmful to the stock market.
A rising oil price after a bear market in oil is indicator of demand for oil. A rising demand in the early stages of a bullish move in oil shows that the economy of the world is expanding instead of being a sign of bearishness for the stock market. I don't want to try to be smart here but I think that oil prices that are below $80 can still sustain a bullish stock market.
However, if oil prices rise above $80 and stay high for a very long time, this will affect the economies around the world and be harmful to the stock market.
There is a lot to be learned from Intermarket Analysis and going through these charts can be confusing to the general public. However, in the hands of seasoned traders and investors, they help to form an ever evolving big picture that will guide the hands of the master investor.
Here is a summary of what the charts and intermarket relationships are telling us about the world economy and the various markets:
It gives me a long term view of the various markets and give me confidence in longer term positions. However, I still do short term analysis and base my entry and exit positions on them and I use trading strategies to enter any stock. I am a trend follower and I follow the trend of any market until it ends. I find that following a trend is much better than trying to guess a top or bottom in stuff. For a shorter term view of the markets, please read my Daily Stock Market Analysis 2016.
Here is a summary of what the charts and intermarket relationships are telling us about the world economy and the various markets:
- We are experiencing a long term bull market in the US and markets around the world are confirming this. World markets are also forming many bullish patterns.
- The various sectors in the US are confirming the bull market in US. Many have broke out of bullish patterns and some are breaking out confirming a bullish long term view in US markets.
- Since we are in a long term bull market (weekly uptrend) in the major indexes, this is a bottom fishing, buy the dips, buy the breakouts kind of markets for investors and traders. Everytime the market falls or stocks or sectors breakout, the way to make money is to buy the dips and the breakouts.
- A rising US dollar is good for the US stock market. A neutral US dollar which we are in now are neither good nor bad for the US market but if the trend of the US market is up, a neutral US dollar does not affect the bull market of the US market that much.
- A rising US dollar is bad for commodities. But a neutral sideways moving US dollar makes it easier for bullish patterns in commodities to follow through and that is what we have experienced in the first 3 quarters of this year in Gold, Silver and Oil.
- Gold and silver may be consolidating a bit (moving sidewayds) awhile because of the heavy amount of supply in the weekly charts.
- Long term, things look good for oil and the oil & gas and energy sector. Rising oil prices is not necessarily bad for the stock market at the beginning. It is only when high oil prices that last for a long time which will be a bad thing for the world economy.
It gives me a long term view of the various markets and give me confidence in longer term positions. However, I still do short term analysis and base my entry and exit positions on them and I use trading strategies to enter any stock. I am a trend follower and I follow the trend of any market until it ends. I find that following a trend is much better than trying to guess a top or bottom in stuff. For a shorter term view of the markets, please read my Daily Stock Market Analysis 2016.
