The goal of this book is to demonstrate how these intermarket relationships work in a way that can be easily recognized by technicians and nontechnicians alike. You won't have to be a technical expert to understand the argument, although some knowledge of technical analysis wouldn't hurt. For those who are new to technical work, some of the principles and tools employed throughout the book are explained in the Glossary. However, the primary focus here is to study interrelationships between markets, not to break any new ground in the use of traditional technical indicators.
We'll be looking at the four market sectors—currencies, commodities, bonds, and stocks—as well as the overseas markets. This is a book about the study of market action. Therefore, it will be a very visual book. The charts should largely speak for themselves. Once the basic relationships are described, charts will be employed to show how they have worked in real life.
Although economic forces, which are impossible to avoid, are at work here, the discussions of those economic forces will be kept to a minimum. It's not possible to do intermarket work without gaining a better understanding of the fundamental forces behind those moves. However, our intention will be to stick to market action and keep economic analysis to a minimum We will devote one chapter to a brief discussion of the role of intermarket analysis in the business cycle, however, to provide a useful chronological framework to the interaction between commodities, bonds, and stocks.
FOURMARKETSECTORS:CURRENCIES, COMMODITIES, BONDS, AND STOCKS
The key to intermarket work lies in dividing the financial markets into these four sectors. How these four sectors interact with each other will be shown by various visual means. The U.S. dollar, for example, usually trades in the opposite direction of the commodity markets, in particular the gold market. While individual commodities such as gold and oil are discussed, special emphasis will be placed on the Commodity Research Bureau (CRB) Index, which is a basket of 21 commodities and the most
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