Post by ketch00 on Nov 27, 2020 16:46:14 GMT
Not all goods are created equal. Oil, in particular, is vulnerable to supply shocks. Usually unrest in oil-producing countries or regions leads to higher oil prices. A price hike due to a supply shock is negative for stocks, but higher prices due to higher demand can be positive for stocks. This also applies to industrial minerals, which are less vulnerable to these supply shocks. As a result, cartographers can view industrial metal prices for clues to the economy and the stock market. Higher prices reflect increased demand and a healthy economy; The fall in prices reflects lower demand and a weakening economy. The chart below shows a clear positive correlation between industrial metals and the S&P 500.
Minerals and industrial bonds are rising for various reasons. Metals move when the economy is growing and / or when inflationary pressures build up. Bonds decline under these conditions and rise when the economy is weak and / or deflationary pressures build up. A ratio of the two can provide more insights into economic strength / weakness or inflation / deflation. The ratio of industrial mineral prices to bond prices will rise when economic strength and inflation prevail; Conversely, the ratio will decrease when economic weakness and deflation prevail.
Conclusions
The Intermarket Analysis is a valuable tool for www.freeforex-signals.com/ long-term or medium-term analysis. While these inter-market relationships generally operate over longer periods of time, they are subject to withdrawals or periods when the relationships do not function. Big events, like the 2008 US financial crisis, could knock some relationships out of turmoil for a few months. Moreover, the techniques described in this article should be used in conjunction with other technical analysis techniques. The Industrial Metals / Bonds ratio graph can be part of a basket of broad market indicators designed to assess the overall strength or weakness of the free forex signals market. No single indicator or single relationship should be used alone to make a comprehensive assessment of market conditions.
Intermarket Analysis
A top-down approach to understanding the stock market through its relationships with bonds, currencies and commodities.
Minerals and industrial bonds are rising for various reasons. Metals move when the economy is growing and / or when inflationary pressures build up. Bonds decline under these conditions and rise when the economy is weak and / or deflationary pressures build up. A ratio of the two can provide more insights into economic strength / weakness or inflation / deflation. The ratio of industrial mineral prices to bond prices will rise when economic strength and inflation prevail; Conversely, the ratio will decrease when economic weakness and deflation prevail.
Conclusions
The Intermarket Analysis is a valuable tool for www.freeforex-signals.com/ long-term or medium-term analysis. While these inter-market relationships generally operate over longer periods of time, they are subject to withdrawals or periods when the relationships do not function. Big events, like the 2008 US financial crisis, could knock some relationships out of turmoil for a few months. Moreover, the techniques described in this article should be used in conjunction with other technical analysis techniques. The Industrial Metals / Bonds ratio graph can be part of a basket of broad market indicators designed to assess the overall strength or weakness of the free forex signals market. No single indicator or single relationship should be used alone to make a comprehensive assessment of market conditions.
Intermarket Analysis
A top-down approach to understanding the stock market through its relationships with bonds, currencies and commodities.