D.R.E.A.M - Dollar Rules Everything Around Me (Intermarket Analysis)
Intermarket analysis is a powerful tool that gives traders/investors a macro predictive direction of stocks, bonds, commodities and currencies. Intermarket analysis states that all asset classes are interrelated and that you can’t definitively determine the direction of one asset class without examining the other asset classes.
There are several key relationships that bind these four markets together. These relationships include:
The INVERSE relationship between commodities and bonds.
The INVERSE relationship between bonds and stocks.
The POSITIVE relationship between stocks and commodities.
The INVERSE relationship between the US Dollar and commodities.
NOTE:
A rising Dollar puts downward pressure on commodity prices because many commodities are priced in Dollars, such as oil. Bonds benefit from a decline in commodity prices because this reduces inflationary pressures. Stocks can also benefit from a decline in commodity prices because this reduces the costs for raw materials.
Over the last several weeks, I made several posts, which indirectly talking about intermarket analysis:
In the posts above I stated where I thought price was going and would possible reverse. Because I was using intermarket analysis in addition to supply and demand, I was quite confident that at least one of the trade set-ups were going to work. So lets take a look.
Based on all the supply zones, I felt the US dollar was going to have a hard time moving higher, so I was looking for set-ups to go long on oil and gold.
In two weeks oil has jumped from $64.96 and hit my speed bump at $74 and even it $75. My target still remains $82.
Gold has since bounced off my 1st weekly and daily demand zone, but I still like the lower daily and weekly zone better.
I prefer the lower zone at $1355, because that zone took out the two pivot highs at $1300, but price may not get that low.
Intermarket Analysis has been a game changer in my trading, but no one form of analysis is ever failsafe, which is why I prefer to trade supply and demand as well.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
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