Intermarket Analysis: The Study of Relationships his chptr covers the main pons of inte market aa, tating withthe osevation that all matte ae related wl itoce at llacon and stor rotation rtgies tat ‘us tae othe sess eye, a explain how stock peak al rough before the ean ter ints ncn the important ae ply crude ol how exchange traded fandrhavereoltonized Inwermina wading, he advantage of ang cars, why viewing the big pete inporant, ner ‘market iglcaton fr tech ni, how it as new dimension to eal work, wy ‘evo ep, and why elton change. el end with recap of internat principles All Markets Are Related As the uve ipl, rarmata ana ithe study of ow various Bnei mths ae veld to cach other Tiss departar om pie orn of market tals, hich elie pinay ingle Ime proach, Stock market alt, fr example, wed to spend ther time amling the stock athe which nclded art score wll edd tock, Stock trader Interstate bendy ome mbt or dlr (tention cere mate). aed nore analyser apn tek tlying eh bond market without wor + ying wo much abot oer markets Carmody tars ad thal techn the rection of spin curvency markets wasted ‘hove mares a di care mucho oer set lane Ted atures specie al interbank der Ttermarke analyais be shy allow varios nancial marks re relae 0 each oe “hats na longer te exe Tao dar analy ha ten major evolutionary ate over the Ian decade by adopting a move avr intermarke approach. | Hks to think hat my to eal ‘hooks en internat nals (pbihed in 1991 an 200 hed move things hat dein. I would be nti dy fora Wade inany one of hie for ase cases not tay trend in the ther theeeen ‘Te bur sot cies nen ert werk bn, slacks, commas and cones. See eran often he direst set das incract wth ah er important fo reel con enna Psa understanding ele you appreciate how other Gari markt ietnene wlgheves rare yo'e primarily interest in For exape, Hs crt ksow how caenhsctntcks ner ye wing stocks, yshoul be watching Bods bets bond pies Atay wen nthe ppt retin fst nmin nes, oi te bd markt ace evs sock ys are incre crate wth bord pies Tat ing he Fil bod lls (sng tn pri) an Be nese wating for tocks Pe compares Uy on the 1 year ot othe SP 50 dig 000. After pean it ana (ist ow, the bod striding ot aster nthe tock bt By ‘Rien the ton yl lento owe eel in er we th SA? 50 was til nding ‘Jase though he Nas peated ht pring) Th SAP S00 de ta ing lth forth “one of hat year (econ tow) vl tered a mj bat ark that sted fer more tha wo Jere Tass pet dromaicesmpe oii ond ying cry wasn tt he sok ma Wate tube dermastrtes ow the bond maize aly changes det lore stocks at opr ueing pointed fen lenin ndictor fe stock markt, igi 1 abo demanstaten yt important for teck nals oak renin te hod market to onerton Wyott boa rade ou sold be watching tes In commodity mats, A jump I com nny ees, for examples ly oct wih drop abo values In ante illsraion of Frere market impact anaes, aling (LS dll wun ests nig commodity price ‘Ravan oul ae ater inthe boat, the diction of th US. cree eb determine the eave Meatienes of foreign sel compared to thos the United States FIGURE Li Drop inboed yield during 2000 warned of stock sk.Asset Allocation Strategies ‘second enn why Xs portant ora tem rstionshps iso hlp with he out vrecro proces Tere was net oo kang go wh testo choces were Mote to bans, lacks orth Rec tlaton mul were sed on tht ited philosophy, Over thet decade, rowetn eninnt chee have bonne conser Since 2002, for exam, commodities ove bec th stonget asc ar andar ow recogaised by Wl Street and the inven pubes table serv Bans a stacks The eeegence of exchange trades Fd ETF) hs a lot voce with she neni pop f sommenty aig The same struc for egy crrency rut, which hee load 0 rn since 2002. "Cons the relative erformaner ofthe fut et dass spe the stat of 202 when the LS ola tried s jor deci that evenly took toa teow: Dring the 10 ye spnstrtng, ‘in 2002, como rcs pn percent. By comparzn bund pices gale 23 percent, while US suck eprint relatively mses gin of 9 percent. The maln catalyst inthe commoty upturn wat 32 percent dop inthe US dalle That ees the dol al commode tren in “ppt detons A fing dali raul in higher comedy prices Coins ne ordgn cece enh the sane drone he eps econ gure 1.2 campae th rend fd US Dota Index to the CRB Ende of comm prices lect 2000 anid 20081 lta he to taste wenden oppose directions, Kean ao vecee at he major ot name price pan dig 2002 (up arrow the exact me tine tat the dlr tte dropping down ate). The inverse eaionship betwee th dol snd “onnaiy mats oo ofthe most constent ad relibe elton intermarkt work FIGURE 12 Dollar pakin 20? evo mj commodity prFog reais so hc om 2 ling dl Tats eps te forces oe rapa commode Be ras ol Can, Dang he 10 year starting in 202, ‘hese dtr hosted ying oman price) eres der tha ivestor ne ened fom he byt espn S101 percent sea 0 pct forthe A heir ae alls choices ‘onde and tock, acne fn are ies wy. | ETFs Have Revolutionized Intermarket Trading Eccange-al fds a Bl la 20 Jo with expanding those ch aasrmtitis and currence afc, he explosie poplar of ETFs has revelation she work Streator wang ahaa increasing yt ienlement lool rma tye During he 199%, for example he sity to incre commoitie and cee 0 one's pollo wat ace impssieo en eng comer and earteny market aya bying stack ana lock exchange canted dsc el fo tly ny aet chs yer in the worl Neil fo Fee of th fares abt The growing obity of ETF has that we'bereling very ely on ETF trout this book o show how markets trae eho vantage ve tracts Another lace where ETH me come extremely pops in inpementng er tation strategies i Sector Rotation and the Business Cycle Inuermarket analy ply sn mprtant on see etarn steps. The US. ook marks i ited no markt actors (hich ae further ured it nt groups). ones Tho tas markt hes Deedes and aprons Day QTD } lange raed fare woe cover alae etre ad matin erp) -Tot rea ats the ovement nan ot farina er at int ge ofthe bs arc show you er th bho owe meh principle dn char rag tat you're in ergs) oops Hatng a aging market str othe pr rere nodes and ont of tenga Yo'l lo lear hw tacking sector tation offers aa ihn te rector oft sock net ana te coro. ers nart ofa vw bull mathe in stocks, eaeomially sensitive groups ike consumer doeeonry stocks (wich nde retrs) wally do beter than mos other storks. So do olga ratipertatin sock, which re dd to the busines eye, Small ap stocks sree market bots. Near market top, thine very sme group uly turn down Hrs Ieney to become market lenders neat Energy stocks (which at ted tothe price of ot) ave theca a ball ark stocks, Energy leadership almost away dang fee ths stock market One of the ways to tl Sat the tock market peaing# when money stot low out of ergy tock and int defeaie sectors ike consumer staples, health cae, ts warning sg8 arate Pl shew yo bow o spot tore rotations and how to tke aang of thenn And Sahat they meas= Stocks Peak and Trough before the Economy 1 comomie wes (or eens) The npn tps the stack mark ual lead peri 20D tock marke ofr example et ace the Flowing spring The Oto 2007 mt. suber ome a markt tons. The edi ofthe st wed make apne ee nether When the tock et op od Ko recent to rtcson during 203 nd 2009 vet weakens, moneytenist rotate ont of tacks into bonds Atmarktottans the poste pom Money ttvou of nd td ck i tok Fortunately. prety ey tsp hse tein esto sctiwat which we'll demonarate tr is the Boo. Ks an oseparate tems only on mask ‘nina markets rr resin dhe economy. lntrnrk aml ght ‘certo tthe ecmony el oalo see inthe Bock that bonds, stocks, aml como tcshwe shiny of pking and roughing oa predictable order drag urns in he busines yl JOHN'STIPS ‘Bove usualy change don fet tops atts, locks tu seco nd commotion to That know wl dp detain wwe tobe a cfr stages oe buss oye wi ne you dame we tha buses edo uring up rare tm © The Role of Oil ising ol pres rom e bypaning of 7007 psedel a tock market down ater ts yea, Ois ole nthe 2007 maretiop wan't a aeration. fas ery nama Rig pie ave om ninth lt 40 years Ringel prices hve conto to stock ma tr to every US ree ot pea end reskin bar mats, Th wa ray theese during he i197 when a wip tndhe priv fede ring 173 ring the Ara OS bag) led to 80 percnt sock met as the lowing ene (19H) Spikes in the price fre lo preceded er acm tock ake hops during 987 199,194, nd 2000, By entra, hap drops the pice of crade have uly adam on teks That was the ne athe roe tw tag was inary 1991 or 700, ‘eich pe nue ul maetn stock Th wy marke adr by stocks ed to ais als danger to th atck mart Thats alo why ou nerrkesahs bs toabrays conser atte peice of licen Upmard spies in ol prceave preceded motstock market peaks ‘ng prices ul fc the Fe ora eta, whch wean sock mk ane ‘Sowa ha scone. Figure 1.3 compuresth prc fr clothe S500 during 2007 a 2008, The chart hows ‘wo comistent interme tendencies, The Batis Ut ing ol prices sly precte stock ket pk Crue started inbing the srt of 207 st up arrow) fer ade plback doris [Ropu cre armel yp even more spy tht September (second up xow)-The sock mat ls moth ter dating Oct rs doo ram). Rising ol sual warning gn for storksz SPR aap Gro Shain besa Lomanst Lan 025 Wsme 270 Chas Ban) cama PIGUNE 13. Ric in crue ing HBT oma 0 och pk soe to most market os The sca iterate tal sly peakafer socks do. gute Ssh cro king daring jus 208 (cea dows arom), months ar be tocktop mi Advantages of Using Charts All of hs tlk shout intermartsaonspe may start sounding ke alot of esomicteory. This spray the cate bees itermurket alse ie asd on economic principe, Howes, {snot theory. niermarketnork tart driven. There Is noting theoretical about + profit and toa statement, Eonomists look a economic tits to determine the diretion of he conomny and, by idence the likely dren of cll markets By conta, charts look at the markets ‘hersele That makes abi ifrence,Eooomi statics thir ery nature ae bc: ating ‘What lc aul they They eles what happened at onto bt quarter: They tl ws oshing owt the fe (or he peste at ter). The markets, however, ae ferme eis “Tha why the markets re clleddouting mechani, Sols atcpate (or dicust)ecoomle trends ine months ino theatre There's as a reseanzome markets are call ats: Which ‘woul yo rather depend on backward ooking statisti or frwartloking market? ut aother vray, would you ater pce your tat in ging o edn net of Fare mate res? Economie ely on lngng sonoma, le carte thet erst in farar ooking Finance marhets | ve toc uy hangs dnt ext, aa uy change dec bse | sod Ttraasboren cere ere an at }rhcdnintion gos tothe often rly, wich is bse ome emis that markets secon of ew ants, a ec chat asa het a of ed nage one enon why nermarkc ana chars Chars om fad eee big ratage nema work bea iy allow wt to Tok to may dilee ane eter tg lt nyo cold tly al cmpae arta ove th work i ll sates vito the wef cts, Besides aking compan of any makes oc ase are necney ta heatesetin any of tse marks All anc nes knowlege of ow to winchester and hay odin which mrsteate going pan wich one ar oping ve che ork gocs tepfrte by deterinng wo tld kt are moving the satne cor noone dtetions w Viewing the Big Picture Is Important -The gest ene of he vin ols described in sso re taney aod aor Tu Thy cane apd oy markt anywhere the Woda tan ne dens “Tapa pled to term ing wel as ero veing Any mort hat a Be aessreas te analyeed-Tat gv the cars an enormous avastage over hse who prefer fo vane farm of economic Foametl nays Those two school of abyss ve 2 potent des wt The coat forced ode with ok ata The dent eat ‘etortadiecompany aed inary ears) hata mend amount of tt ea with That (Tove andaenl amt or covering wide arty of markets Ara el onan ear fore to apc. Te intrmarkt cart by compari, cn fallow ny mast aacmeycoihs to anywerin the world without hing ean expertin any ae of them That a jeuty bp avontage nan nteratd word of itera nasi and tag Mor npr Ett iy ose so mny mats rar erent ct canes al rer the wr provider vaerarket chart witha ips view of wha realy happening Thats huge antag een mead ven thts often cen among waht aval who Follow only small portion ofthe nc spectra mm Intermarket Implications for Technical Analysis aecae termarket wok ole looking at wo many markets, it as to be dane wih price cats rant cntt nd most fet wy tty intermake nkges Interma work peaip apt the anno heal nal als aaetsHec me wo lk above things aad be rested toseurityaalyte an eononiss, ike ination, deito, the ection sects th nt of dlr, ad the sta ofthe busines yee, Some wdertanding of tents mack, mndvommodses rotate ding the basins cyte, for example allows vo lk arrest oft eon, Secor ation lo sed ight on whether he economy is contact Ingo expanding, Pome coreumer dicen sacks dean a ecra expansion. Eery seh oo cae ivatof an orpandon Conner sales serge! dung an econ domei z 5 5 é “The finn markets ve leg ndators of xan tends 1 took dhe Fer! Reverse nti the ping of 2003 to acknowledge the veto dfn. The markets had spotted he heat ser sek the Fea et ge ha 1 ook char ans to vs th eet Toon the hosing collepedring 2007. The ects utroung tack market peak ing 2000 nt 2007 demonstrated the nee 0 laerprate we chat apd eter market als int £50 mc end fundaemtlforecsting I tok the Wall Srect community to long ofa what thanychrttraleny ee daring the a sf of 2000 ac 007 when waning sige aa markt oper ety tile, an thatthe economy warheaded for wale as you'l en the faiowing ‘haper). Tete ha ecicl elsie hortt for of andamena nays do he Droit price eto in any ma i edi indict of hat market's fdamenta A ot EA sre sats het clients) pid big pce For grin the clear chart gas that the marhea were ing el ring 200 2007. The alo pid price fr inoringtermarhet signals ti A New Dimension to Technical Work “The greatest onebuton made by intrmarkt analysis tht it improves the matht says’ pevipera wading vision Tying 6 trade marks without ntermarhet awareness ike ving car without looking at the sie ad yearview miro an windves.fnertaret aa ‘Hadee all markets everywhere on the le. By turning the foes of the market analy oxtward featea of ward, intertnarkot work provides amore ational understanding of freesat work in the marketplace. provides more vied view of lol markt behavior. Inermarkt aaa fies activity fn urrooning mast omc he sare way tht analysts use tera market Is oes’ replace traditona ecaical analysis; it als another Sndicatore.Iteaarket on Aimenson oi iw Intermarket Work Is an Evolutionary Step ike co thik dt ntermankt aoayse psete another ep nthe evolution of teh theory sn prc. With he growing vcogson that al goal markt are inked, traders can ake these Tinkage int consideration move ad morn hanasu o ts exit and its waves leon al masks ern tals ican sted to prfrm inert work \ermuke aay provides amore wef emer fr anderataning hv inva markets ne eres late ne nother, Trot moe of the 20 century, technica bd a0 ‘over fcta Ths new century hos witnesed x mach roe apleion of tenia principles not Jon to ancl warkts heele, bt lst det wie npeatns for econami oecsting ‘Een the Feel Reserve looks tthe anil markets to et dues about the futur coor of the ‘coumomy hu to we ars todo tht, The intermarkt principles presented in this book offer 3 rl ber view ofthe fate of analysis, Believe ht inter market aa wl ply a8 Increasing portant roe tht fare “Ta gwove marke itrltosipe it ignore enormouly talable price information, What worse tat ess maket analyst Inthe poston of aot erst the externa forces tht owe the mart n whic they re adng The ds of allowing only one market a one Market rslyt nal to Bow what shoppe i al of the nancial markets and ust understand the Impact of enn those elated aes al over dhe wer Teal analy as oro tas ferbilty in moving fom one ake to note, and s extemal useful in comparing the eave performance of hse marketsWhy Relationships Change arent sti Wie most rma constant vet lng periods of tne, hey As yo see shorty thats Intranet ein tomate chang for hort prods, Some changes te more og st ‘Cintappene betes bomsand socks Nothing changes, however, without arexan.The hang ‘Rtn betwen Fd and stoks dat tart 3 the oi entry came toa os sigue at Intestin 2000 woul be dient rm ater dentarns since Wook Wor That became ‘esl tra fter th owing cap daring 2007, which rite the wort fancil melt “Tose he Great Dereon, Government temps to tar the barnes ec ick up elle on {redo ial and wonctnry meas, which had worked the pst Unfortrt, thy did't ‘wo all tine fa “That war ec oe busines le fier 2000, al epi after 2007, was ike ater ta kon ptr basins cyt Deflationary presiores overrode those train gorerent mea fone, Sune th ntetaret changes th! tok place ner the start ofthis ctr. and again afer 2007, gw plenty 0 warning ht hi tine would be dierent. The trae pines presente in this book are aeed os guidelines, not rig ies. The aby aap to chgingmaret dramstance one of he keys to profit This as tre fete work at tii any oe fr of aetna. Although intermaret eltnships te onstant mst fthe tne, there wl Be nance whe some ntermarket elitoshp (or cote on) may ween or short perio ine Ate de i tr to downplay reatonsbips| nth srt to strersthen pin Fortunately, weve tole let ws know when the correlations Sr vteog and when they're weaken Although he cope of ntermarket aaj roa, forcing Ato tetch our imagations nd expand cur vison, remain ete about the prospects for sf ture ape youl gee air ihn hs ook, Intermarket works very fer proand or market research and profitable trading oportntles, t Intermarket Principles ere we begin ata ns ofthe aio nna makes, le review the sn inter maket principles cv which his pach i ed The priser re relatively Fe in mer and easy t0 vest Alar bs om nnd econo principles are supported by hiorkalanajs While thot neat elation sted blow hae rem very constant overt dca, ome ave “Songed ram dnc oie. espn tht happens and how you can tell when es appening“The bse trmt encpes ae a markets afk to cach ther All gh sadly of ny one mae hoa nce als of heaters. The four ast hoes le sons Commodities Currencies Internat elt: ante dota and emotes tend in opposite directions ston pices and commits tend in oppose dro since 198, hoa tok pies ve esd very since 206, socks nsicommodies hve ben else correlate ow they inte seo uss changedexon before sols stocks uly chang Breton before commodities. tony psk et top, stocks secon aed commodities bt Those rotations are es elable at bos than op eign inten Al global ck re ney correla AA cng dlr benefits US. stocks. seh weaker dollar for orelg stock Emerging markt ae ltely ed to commoy tends j@ Review of the Old Normal Most ofthe Intermacke rinciples jut ted hve remained petty constant ver the pst ew de res Some however lve undergone anger ve he last dead, One change that his eloped Terecen ore sock and commodity ies he becone ely oreated Tha been ep ly tse the al meltdown drtg 208, which wa med ay y defiatonsy col lipid howing inte Tho more ingrtntintermaret hang sto do wth he eas vrecon onde an sak llowing the Asan carency cri theate 199s, Since 188, bod and ok prcerhne wenden opps deco (which eere th ee relations Tha aboype daring decade wn dfs rele Ax the man os fh ook Pere inte wr na! ncmarkteaiondips at ext since 2000 (even more sertnce 200, fa bil review ttrmarket relat that exe the fl ees ses of the prior entry to ay ondtion Frou ntermrtt wok, ad to examine market eee tat ed to newer market bon tht exit a curren ine, Wel review tol ul ‘elatonsipin the next chapter.eta e Review of the Old Normal ts chapter reves the ola ncrmaretslatonsie dat existed during he at thee ecadesoftbe 20h entry A prin commety prices during 18Dended the hyperationary 170 and ed oto dees of inion nd all markets in ors and toc. wa sow Tow th 1987 mat rath eiforced interme tends aed ist aq war athe of 191 tot econ wa 1 yet ater Iternret relationships hel fe during she sathbear market in stocks tat tok pla during 196, The Asn curren es during 1997-1998 ioc the threat of dation for the frst tine soe the 19305 an change! some Key inermarkt Telatcasipe The ells of We Jojanese stock tarkst i 1980, and resin delist io hat ‘onnty alo ontibuted tothe growing elton tetas the ew century stated % 1980 Was a Key Turning Point The yar 1980 mporoot nthe itor of termarke etn. The omy ae rst dot jer and ended te byprinlton of the 197 when hard sets commie ed and oper make bonds stocks edt. The 1980 peak in cammaiity pices (whch anced eth baton inthe 5 delle) began a twosdecadedaatienary tnd and unc jor bul Tnket in onde andstcks, The combination ofa ing dll ed filing omnes ding 1980 Controate toa pr nbd rks dg 181. stack mat Bug x or bal tev yar er daring 1982, hated strogh tec fhe 20 centr. Tat nora rang ot in ae story lowed he ronal ntermarket rp very clone Tet, the major oak commits colic with jr bottom in the U.S dla Tha co firmed on ofthe moat consistent nermaket principles that eammodty prices and the ib end in oppote direction. igure 2 sows at the 1980 peak the CRB Inde of commody pices {own azo) coined exactl witha jor uprnin he US, Dollar kde (pao) That major ‘pturn nthe dlr helped end dhe comedy intionary pial character the 197s, Ai ce casecammodty eof Ftiog commas ces ay erodbn NeeTRO Gra one RO eilGeacom Ea ipa gh 034 om 1928 Clon eat cap 050 (500. \ Viale U.S. Dollar Ne index # I TA TO Ba A second intermarket rape that bond al cond prices end a oppose diction “The bi drop tm eommoliy pies daring 1980 wa major reason why bond prices turned up 30 cel during 1981, Fg 2.2 shows tat msjr pk in como rcs dng 1980 (down trom contributing toa mjr opt in Tena bond pricera year be daring 1981 (up 2170). ‘Ate etermarke pre these that time war that bond andstoek pies uly trendedin the sane diection, (Phat rdatnship changed ia th ate 199.) The 1981 bottom in bons cnt telto he 1982 upturnin ck, Figure? showsthat the 981 upturn inTeary bon peices (et “parrow) was fellowes mojo upturn the SAP S00 yer ter daring 1982 (cond up arrow). TE Rana ROD iaatanicon ee open ah s Treasury bond ATW RT OET SS RS WTO TST FIGURE 22 Ines cren between bond piesa commoiisAST G IT, sare sll Tino onan oman canvas cere le sanin HM bond | price | ie c FTGUIE 22 Pov or daion between and stock ries se fc at bonds trad up before ake so flowed the arma pence nth se ra pontiac precede erasin socks Tamar the decade aorta a, ling omnis, nd ing bond an tack price (ot de) ee ee completely reversed Iterstarit tensrom the 1970 ws ‘The End of the Inflationary 1970s rofl under he drt he fn aks nt ten 1980 es) © ca gabon be 1970 Tint decade wine rep i comnny een fin ad ng weret rae From 19710 1980, the CRD ee aes pc aed by 250 tent. ie ochre a bod py BD or eg se ta The 197 went lb fr bm They me 150 et neta Ae red and ed dee er he re eo ese hen ha 10 yar pvt gs, he WS. uk ort et ao MS anim ig 974 tant ep at arte he er before ing 17% Heer ater tangible net He commode net He bon ts ea ny eno at dec, pis estore YO an once Awe de TEES pres nce opr palin gland er mmo 018 aan snes eck, meme elon rig he 197s ao elias enna prt spe ier ol usa rade owe tok man } sing ol contd thier nme pes, whch coratd Ko ves ond SSS aoe can et et Orlin, ish ocr se WS ci mata Towns completely reversed tting a 1280 wh Fek 2evi oF TE OLD NORMAL commutes The CRD nc fl ry asec highaf330.nd bean 20-year dds, daring which saree a ft Daring ds ae 20 yo, prices ell am above $70 108250, si nals of 6D pct cm T98D peak Wah fo years fhe 16D comedy Cop, 2 race rte ofthe, 97s were completely revered. The nex to decides ote paper ass Tebonded-zack atthexense of tng sets He commas, wich lout fo", Hagin oan ih ut The 1987 Crash Reinforced Intermarket Trends “The igs acl eva of te 1980-—the 1987 sack make crash—peoriel anther compl howe markets te etd oa other andthe necessity fr ping tention 0 al ma Je Stock anayts who ora tc acon in relied markets ke hon an emotes during thee alo that year were ied by 2 markt cath ding the secon the four yes her 982 two the mah oes sporting ish atack pees were fallng commodity pics (ow Flo) asin ban pie ing intoest rate) ving Apel 1987, wee, comm rice ike higher wie ond pres tamble (ing ing band res). The xray continued io at Rout before coma ily suki ‘ly pein The fut hb prices peak our metisbeore stocks aoc agin demonstrated he tenon fer bond to change dation bre stocks The stock marke final eased that October eins 1 ven pees th peng and sme on WallStreet, a writen aries warning dat Incemartet trad bond a commodities dred very daugrous or seks, While these of ‘heck dower wassup, the fat hat tks dtr down shoud thoe ben, Figure 24 towsan spwrd pie fa commodity prices (op arr) daring the spring 1987 exci with linge in ond prices arom), The SP 50 ceed that Octo op potion. “heft tt the 1987 srk markt crash wi bli sope provided sxe Ks in intr vo we, which st lab stock mets become highly correlated ding market downto “Fue fonon wos repestec gain daring 2000 a 2008, Asch nes, the beclitsof plobl iver Conan rely dine, Aswe'l ae tr inthe bok, ising dollar rag ket downturns ly ne feign tks il even er thas dose nthe United State @ The Two Iraq Wars “Tne yer afer recov fromthe 1987 clipe, gl mares were force to dea with Ka ‘apt 1990 invasion 0° Kawt, Once agua, ancl markets reacted in pete intermarkt fuhon Gold and ol prizsurged tht sane anim the months fllowing the iason wile bond Ad tock ples sound the worl able, At the start Desert Stormin ary 1991, all hove teomariet teenie aie, Global Bonde ad stocks oumed ther pred, wit gold and oi reel Then years ater (rng 2009, market alts ere aig he rspets fr anaes Ig wr ad ere Fred to sty the 1990-1994 markt reaction for pce 1s good thing,[OURE 24 ferme ede leigo 187 het ra shed, gare 25 sos the apa pin recip eo) ring he son Ia 190 acid wth a tod downturn A plage n eral (ows arrow the Flowing Jaa med ook pices back wp pin. ences te urge nese ing th 990-1994 Desert Strm era were rmariably in lar ertose needing he second In rls ver decade ater in 2002-2003. Dring the mrcea confit, gland opie soared athe mots leading upto the oben of he ha war veka anon el st they dene during 1990) Ar ore gi, the acteurs Thsates sora cmplete reversal of thse wserarket tenis. The week tat hotties started ‘Qtek 17,2009) de sock marks gel & percent, whch wi dhe bigest wel gn & aa ee sean TEX Ge sna x Pepe cat mah sce Law aco Cae 28 Ong) Bier PRECT RESET: FIGURE25 Howe pect tech aig eon Gall Wor wen ommsaee E.ne OLD NORMAL 8S 20 years (an stare» bl run ht ted forfour years)-While lal socks wee alhing gl price fl 15 perent, Crue of pice amid 33 prc A percent jmp ia the U.S dollar ‘Sneed othe dpi com pes. CGoidane ol pcs olen ee dng ir fc a aback ce the ers as pas ond pies, which al attrac fe haven ida th ont ean wp the seco rag cr situa down as a masive swic took pce fom the elie safe of Tress nd ick into ‘orks. Inboth a conics, the fornia markets bd, commie, deren) Aid exactly what they were expected to do from an ntrmarketperspeetive. Make anys who sti maretrestions daring the ist Ing war fr coe to wt might pen dig the cond svar ete’ appointed, “The ct that bonds an tac ts inser ding the el a er ding 2002 2003 elected the she in cation tht tte 1998 whe eto markets Aecapld Did You Know..2 = The 1994 Stealth Bear Market Follows: Intermarket Script “The main enn ofthe mi 1904 wathe 1996 tothe matt in ack, ae cae fom the It tht major sock deve lot eo than 10 percent abogh bond feed he worst all deca). The elatvely nal dene inthe major tack les, weve, kd re seriou mage lred in some sectors of the maret, Scop tock, For example, lat 1S percent. “Teampotton stacks fl 6 parce, while tlie ot 4 perce om peak to roagh Tareprtaton stocks ae oecay lab lors ores because of tha styheay |_ mies Ring i price during er contd othe ous aes nthe uel aati eneports, ve th vesting jmp ines ater and ling bon pees corteute wo huge ses inthe Interet ate-senitve ais, Frm the art of a ec let othe ed the ol ntermarket ode eld em, ‘An pin coniody prs daring het al'1995 edo a downturn i bal pies Ing te vor fat year Bol prices peaked during September 1993, Stocks sla ve onthe late, ding Felrunry 1954. Once pi, the turnin he Bond make preceded he ara instock ‘er psn, socks and ond fl together a commode pices ox, which was to be expected From an iterate perpste The dlr fl roughout hte, och conte othe islaTSO Ga ex roar ai SS Seine eee Teper Hon hat Lew 2 Ove wna chy 2800 335) sep eda Treasury y | we SEWKUTTAVOR WIRE OE TOUR 1.8 Uy oa alg wt Ten nd is ding 994 como prices Js th porn comin pres during 1993 sorted the topping proces fo tend stacks, a peakin the mil of 1994 started natermarke tation nthe othe ection, "cmd pea ithe mile of 1994 contrite 6 9 bond otter Ht November Stocks turned up mor aie bonds, Once agai, eh mks allowed ther por otaton. A om ‘mot drop et high nd prices, which, intr, el tog stock prices, rom thei Fut {qtr bottom of 19%, socks began phenomenal ull un sted wt the end ofthat decade ‘Aer 1994, the stock wake got ep from rng dll fling commodity pees. Teasary peeve int the ast of 1998, which lo sported ing stock aes From an interme Frcs ring dolar ad aig, comsmodis sported bull markets Bonds and stock, tic waste norm ate, Dring 1958, weve one ky intermarket eatlonbip tart to hange-The reason fart change wi he emergence fli fo he rt time snc the 1930 Figure 2.6 shows the coe correlition between Treaury ood ad uty tock prices ding 194 sn 195, Plangiog bon rcs daring 199 cand heary les inthe rate-sestve ies, Both rts then lied ogee during 1995 = Echoes from the 1930s Sustng i 1998, the wor Alin a eae for de iste since th 1930s Tat bape ‘many bese of he As currency crisis tht rgped the world during 1997 al 1998. Another ‘Contebuting(altbough es eget fcr) wat the defo tha wa tating inf the ap eae comony asthe bdcemtary ended Wine comple of eos afer 198, lbs deitio ste tosprend rm Ata (stn cng) started iting bal od and stock makes everywhere ‘hac the Unie Sates, More then ayer bets, the reappearance of defaionconged ne Key ntermatet retort had existed trv mss oF the pote pv That ner vet ange was th ond and tock prices bme inversely creed aot words they Tarte tending epee dvecton, which wat adeprtre fo thee prior tendency to trend ‘ene drestion. Wh va goo for bond fr 198 bore bs fr tock That new bond stock cnsp became pally lear daring 2000 wh bond les ot ny el with tock, but st {ly tm down eke seks, Whi stocks bad pices rens ‘ons sina cw bok tack 2000 ae 2007 aon ey warning asec rate cote. ‘nscond intr make hange was tht conmvadites sated to become more ls corelatet wih shop ln he delta 1930s That clerk Between sok ad co the housing market ring 2007, Tpodites came even more pronounced after the collapse td othe font melon in 208 (nich brought back antl compris tothe Gest Jp othe 1930s The deltonaryinpleatons fat Rate ent ged the Be aarieecks nd commodities afer 2008 That ws because ath ase cases became closely te {Tin ltl conomie yl. Ring commons Wk oper a implied como sen wihck es goad for stocks. lng comity market sggsed economic wea which hurt stock ales These decade ofthe new sles witnessed the resurgence hard vets (ike gl at ther commas), wich wa rel heres of the Fed's weakening the dlr order aaah tet frm elton. That hi also eon red daring the 19308 when the dle ws sated yen he ted Sts of he gold tana The et bot instances es higher fold pice Contrary te opr Blt, gol ast dowry wellness wit arsed daring he 1930 andthe decade fr 2000 te four-year prod rm 1929 to 1932, sear cad cnmoditer tumbled together The only two acts tha bucked dia dition de ince ressry bor pres gold ming tock, cove the pr in como (and ‘heel athe te ter inthe book which ine dene ore compan teen the Fea’ plan lier 2002 aed the 19808, » The Deflation Scenario Inthe 1899 revkion of my book ened Teal dna of the Fania Marks, ¥ ce ‘apt ontermaretams,wih etewed the historic reat tat domi the ost ere nated ane acto, bower ented "The Deaton Serio That scion desert Tre ctpe tn Asian creme and stock rts tht started the idl of 1997 tat oda ep tly dest ffet naomi markets Forth ist ine in geeration tat ope dear pes adhe lat ln 20 years ated make nas omar exesing con caneline bene en of lation, when prices of gods ric at aalower poe might i nt & ‘atin on pans ot qos aka ser aco orl pernd of flat, when pie scl How he fan martes ht it threat of dfn bs eid th aermarkt model since then inna ofaton wan es ety ‘Commas rise fl karly whe Boo eles surged That as nothing ew see alin, commoy pice oly pode ihe bond prices, Wht was nw was ow aks ected 10 he carat a alin ronments ondssing bond ples. nen of ng, stock ics el During 1908 stocks were sl al over the word wle money poured nt US. Treasury tor lol fight stay In thr wads, kl we Bonds rove Th ws sua andres huge Apter thea tem mol (the ld ore,nin ‘nestor por ast orb pons nr sc ‘nas ht sted wh he commodo 1980 and ste for nea tw decades vrs bs god orbs ad stocks Deaton (wich tea cmerge the te wr for bods, Delaton, brent, sai a for stocks ks tn» deltienory dinate, bod prices hat eviomment, however, dot help ks ing dfationary peril ae actly bd or ing in 2000 ae 2007, bad co 14 bao bl Fr conmedites and 0 Defi anges the atop Between ond and few incest ae fl all interest rts fie que the emp Fall ners ates tose Tht new elaonshp ms evident ding the to Bear markt sar Sen ood ike el ight alongwith sto ® The Japanese Bubble Bursts in 1990 ‘tempts eet hat apene the tt fhe 1990 il ing gl epercsions aad te the buble inthe Jpanese sok market urs that ya, which tated 13908 areca nat erent ened i a deflationary qa inthe work’ seal get economy & eer era dealer, centel bakers nthe West were sy sting te Japanese defaon veld way toconbat ees sgoof dni helo eons neve defson sree af comting fica the dcping bans an soca ook pica the Unite Stes vey decade air he 1990 tack whe to, and continues onc erm re the pst dy Mont ones wou stn wh a asasinstip tev make power 3 naka the srt ofthe 1990s cone othe growing to cle, the in event waste an utrency crs ht ‘ite the plang in the pase ai eta te 208 ty canara 1997 to 1998, We'l examine dis etonary even In the next cap ow it change at let oe hy ltermartt clansECE The 1997-1998 Asian Currency Crisis Deri theAsan arteney estat aecurebetween 1997 aoa tet tnprtan res ofthat rss was the drat dcop of Bon sak ese ets ete es real fr tenths moet Jono eee ssn reat rom ht css was varng filing a the felling deca Ove int yet ond ar af 200 wou atin ie ne tie los 5 rasa the eo dln eet the 1990 were clap Bros eh ee clare fs aren ring 1297, defton orth ome Sens eee pcan pres cena! inte Un Sat ponte red tennen the went of panese stocks rd US, bond el oo The Asian Currency Crisis Starts in 1997 arnt sme 1997, he recy a Than srl 0 eK we acre evens nt rep, Th cll fe Asan corey muitcue T enn sk pes wih inl igi wr he ob Fos Sf recom ps nt are al acon to» wore sion Om a cn bond Ov th flowing yeaa hs CRB ax of commoty rer ell he et evel in 20 one To cb nace tokt 10 he tc corey ers rd foci mes of | mms nos tie 3. es ie CRI ae of 1 comity mn dg, 198 ow 1 ao ay pie that nd 19s avec the aes ein 20 yeas Tat end platen pei IncrFigo Temas of i " | cRB ih | index i ih | \ Wl i f A Pal SOR“ yng 0 20 er ow tute frsmorehn adsl anh cote os benign pedo difion The 1998 plang to closet tar that beni din into we dangeous dfn 1 aes in nermarhet eo “The rnction of Aan conta the erp nan atompt tab hel filling cen, they raed interest tes The hike in ates ‘Adan stock astoep tne ht tera eat year aa ronounce et nal ob i murkee Throng those het wo yer al rao intrmurkt relationships eld up qe well except or ote Bonds and Stocks Start to Decouple “The sat nptant re ofthe exes of 1997 ad 1998 wae he denping of onde and toc ‘Decoupsting mar thi bad an sock res ended in appt estan, ater han ering hr rina teeny to ted in th ae ection. Duro he secon lf of 197, stock prises nthe United ets deine wil Teaay bond prices tose, Daring te est al fhe allowing ya, Socks rne wie bends ened, During de rd quarter of 198, esl stupy ee ty bon plc seared Fa July o Ort 1998, de Dow gsi et 2 percent, tok markets {ol fall er the world Whe stock et fillog, UL. Tesry bu peices Surges coh Deringthoe dee mows pic inte olf 1995, 3 Treresberame the stengt mar rt lap in 20002208), -etin the wordt ese pindaring sibequent to urna rae pani, aes usd ke more out of socks and uA Rio US. Tey fon fiche conse Wo be naa he ale resin nts wr.iy the no 198, pcos ht the rssh pase aed soar a cmplet ok reveral oth roe three months Bons cutie fl Erte ya 199 we toch cared oor hs The eens 1997 nd 1928 conte 2 hip bt spar decoupling bana tock, his sted this dy The hanging rls onde and ck started inthe mit ofthe Asan currency erishen ane woe started cating In nancial ci: dln. gare 2 compared fn ad tock pices ing 198 al prt 1999 During he ght criss fom Jl to Oct 1998 (addres), rk pie plage whe ond price ree. Ghtlmestos okt stochall oe the work and Reto the sft of US Treas When rls and bough tock That desgpiag fonds at stocks dvi 1998 war is rae For the coming deca, ‘Dung Kan aren er ht tore nthe ml of 197, vestrs aril stocks ep ht Occ, heise wove rovers: estar cl rcs deflation nse some ofthe an ying The vu or ht sch trating ps ‘deat nate, bord pies se while cm ora inert rlatnships, bt ot Merny piel oichalo happen ring din, Tha’ what append in he il 197 nought fourth unter f 198, a! wa tua Heer, the tock met reacted ev which arab. By 1999 took, etnias ofthe Fr! Mara nel the Following quote on at pred Te deflator ev tht tare oA nd 197 spel to Rss and Tati Aen by sou 1998 and began hur all gl egy srk. png incom pries bd on pec damaging npat on commodity exporters ik Astaln, Cand, Meso Res The detoary Ip of alist ries hd pasve rapact an Treamry bod pines wich it econ highs Mat eens of 1998 werea tama example fe ene Ur plba stermaketHinkages and demonstrated how bonds and atcks cn demuple in = ‘efit wor Earle oon Teste Seto eens mms ow Lt oniaonns voll EU en ‘a Treasury me ra bond ise veo) [ete] — = a a IGUNE 9.2 Hoo wick price deol ing 198 defn cre\: 1997 and 1998 Were Only a Dress Rehearsal “hey thea wrk rat othe inital ata es dig 1997 1998 ool a hear for the destin est martin tock that started nthe peng of 2000. Doing, sreeaece stock mate year since the Gies Depression, bon rcs re nts ike sr pet El The fed wre tts er 12 ties ner a 18 other wth no apps fab necks "Tove whoeed the wats gien during the Asn coteny cri Few years anlee ere alte hf dat ising band pis alin te) dn’ veces be ‘a defisioary inate Ip sonks Moines ‘ur an econo dota tho Fé woos te, which eps slate mock ‘nat Daring faery donntrn, Nowe Fed poly becomes ch es TCA Figure 3.3 compares ed fc al bal yes before 198 a afer a watered ye rico 198, ling ber sere pote oy chs ero), Starting in 1998, hoe, bad ele sorted vending de sme rein of cs (ht oro). A 198, ling bond ee “Grea fr stork Tht cb sen very arya ie bear myn Fi 200 trong 2002 Fire lo shows aks curing down eal of tacks ding 200, They won do ht pe ring 2007.) That mained he Natori tee a bonds to change iret an of tsk “rept instead ond tring downers ic doy tern pie o198). th cae tnnship betwen to mares ad bod the ne engin or stocks Since bn yt nd peso ner tht enamels tok en inopposte diet ser 1995, 9. Lon ara kata cha 91a) HEEL Fogle entre O78Intermarket Lessons of 1997 and 1998 uch wae sb interim ahp ding the wo ware ear deg e ardemonstted te need Tole na vee ch {US toad al ack arte The mas ch orl aks rey sted ipl sn corey se Tose 1909 hocks, but in carences 8 wel strc shat veal bt deamatiet on he sera ou ack nooks tt te or 18 ert of th ior find otted gles Aber fet ofthe A he Secu otto hi the stock Trak ereabo anced ing Hoa ef ecnorialy Teed and ts ore defense techs ik conzue Shc serv tens Fears of bl deft. Iron was th allan commode sang ded ds EF) bes uch eerste he extn ecuncy ox rajansto paves tee tees. ep ck ec son fol vas tht detonate starting scan ngbond pices no longer lps tok Pat another way, on yes now eed ring the bear met in stocks ‘esha the mostnportant or change nh ene bewee nda tors Mecca care the apes of toc vette neck, This weld bore even more ProHoUt 20 an gn dng 208) hat ated couple of yas te The Asian Effect Overrides the Fed ten hack makes bbe brn te ned States 200 h Fede Reser ows A area eas man ae wo opi ber markt a toc ad sins v rpare th eson ie’ work was the rnc off “Rmercan conor The plan di 0 a ng om i by 02 nh Fe ng eb” word (in): tO) el eat athe Fel le ned ne he enya oli that etre wr: nd ; rion wen ies al lover pct and lan ln 9 vk ws, dt usa} es tes aot sh We on cn Two Deflationary Events of the 19905 sing that market ai econo Trt deflationary eve was he vis ring pls during the 19905 tt gave war sent lok inthe yur fe 2000. The vending, 1990 he econ ws the Aan Ae) alan While the Jges stock colp® the an er ‘vo defatoary events tok nul woul tke on Alle calla inthe nest sock {oo sa 198, nich cased lal como prices yt county in dfn it a ai fr mer on dee syed more ret onde pt ns martGRRE an enn om inn eS cRB | Index sini pcs os] Y mn Soyeuooo FIGURE 34 Trudy cet the art wend he 1908 Figure 34 shows eto 1990 dein ne ht happened ih os pa Te don peas the colapoein apes tks tht startin 190 an conned rough heed ei eee The ppc stock markt wa the only major tart ose work i’ crm sock pater he fs Fern Gal Wa ring 1990-1991, The second dawn aow ws comma type trning dds 197 al ngewe 1972 ae daring 98 he mi of he aaeeney ie edt Jpnese mathe) Tht eommodty lange during 198 hse more ‘dons and deste gat on bo yes fw Deflationary Effect on Bond Yields Fire 5 shows the 10 te of th LS Thay bo i fn 1980 199, Hail TDBH, wich was he ye fer comedies peaked. The two arows a ary event excrbed pres. mkt peak ding 1990. Ae tal Been droping ce Tape 35 show Dor te bd market rected to he to de Ta aor ssn is Elling fer oe ans so tio prcone 199, ond ha led sharply daring 196 (whch otto the ook aa cle tet ened end seway fer he be tre ers betcn ts 1994 high ne vs the seme ar marks the point where smo prices arte droping dering the ‘Aan ii in 1992 ‘ord ys mot ed te era drcon as commodity ts 4 {Wik a yea, she ag bon ella file bw it 1993 owt ea west ene 0 2 sens tthe CR ex i hese yea) Ta plange nthe on ye wa est oo The to deflationary ets that sated in A,TYR Gives a we Se ‘pensis gn sopo Lam 048 Leh Chg 1200298), oan ao . 30-year fe ‘Treasury bond yield (Fa cmc me (Rees ante ane 10) Japanese Deflation and U.S. Interest Rates An ngent cn mae ht onc lao s l chiges te he eh Pe a Figure 1 compares the teal the fpnese took OF US intrest tet the 20 years since 199. Theve apps ob Tranet to the yl or he US, Tear a ay one vd creation btwezn the inet ft» 75 coelatn a aan esate crc tat prod, Corea eerste degre of ne ewes 0 eie-the higher te reoing above 0, the rong the ings atinon fan toy age to nas Tera ind “coreston bower to matt canbe ose ar nga, Pele cen mae cor ant sane retan Nes conan essay wend fF ite the Aon crency rs ofthe ate 190 yaw is ore dats ac. WS ton! yl star lect coming om jpn she 1904 ine hd mae mis Tenge ting elton se cton fling US interest aeEE RL ore one even wa 5 ie Us-Treasury pee 3 1, ph Bond yea Se 7 Vy oe q Vay Shon oo “| iy Ny iy Wy = 2 Ww Ly eo J mazes "4 Welly fom stock index Teh tv We FIGURES.0 Unk bewwen ace ols ant Trane lice 1990 2 Summary, “Tis condudes Part ofthe Book, Chapter 1 ive an ntvduction to intermarket analysis, ad esr the fp It has on ast location and sector rotation strategie, a well st role tn cconomlc forecasting The emergence of exchange taded fands (ETE) has revoltionized Interaeet trating The Gist chapter ako explained the advantages of wing carts and ow Internat work asa ge dimension to techni analysts The erucl role of wf was men: ‘one at wll-The fist pte ended with ecap of ntermarket principles, Chapter 2 reviews Intermaket relationships essed daring the lt teee decades ofthe lt cetury (he fd renal The your 1980 yas 9 crucial thing pis for the four aeet clases (bond, stock, Commodities, and curren). Apes comsety prices that year edd tbe hypeintion ‘tthe 1570s and where i two decades of disifltion and bull markets in bonds and stocks {Chapcr 2 showed how iermarkt relationships waked during the 1987 stack market crash the 1986-1991 Traq wa, a the stealth bear take of 1994. Chapter 3 reviewed the Asian ‘irrency cis during 1997 and 1998, ad the emergence of delation forthe fst ume nce the 19900 The malin resulof that new deflationary thet was the decoupling bond and stock prices, which vmaine his dy Pare movesino the 2|ntcetuy starting withevens lading upto an flog the 200 stock ral tpin Chapter 4, Chapel abo hw major decline inthe UL dlls stating in 2002 {ed to major upturn in easy price. Capers 6 ad 7 wil review events lang up to the 200-2008 sock marke sh and wl dw be to earlie inermarkst atl wis waiona charting principles.‘Answer te along mutile-choice qesons. for asec close erin bi stects .cureen fe Ath tovw 2. Alling deterrent uso: commode 10 | perce 0. Tend ony 12, Fang cones orces nrmaly caus nd ces | 6 Wend dos Has ctet 44 Dataton fs hich asst Coss? 1. Bonde b.steoke 15, Alling stocker ay dso ‘8 Aveaker sro fA stongerecomny ©. Atatoxrory Hae romaTHE 2000 AND 2007 TopsIntermarket Events Surrounding the 2000 Top sens lading tan uroundig the 2000 stock alt top sping scape cove esenongh to aus an Gh pi af deri 199 prompted the Fe tose shor erm = oan sat of 200, Moy lave to conser sper and ves sat ae pats (REPT) tating the Nang tumbled Bond yes tock a commodities vedi tr oder Th ed anoedged the sion het in he ping of 209-THe log eas dering 2002 caus command to Baton er aead of stocks Events Leading up to the 2000 Top “te pv chapter dsr we th lal dfn ht ripe he mil ms rast se vate commerce and tech an int the Bnd mark Daing 99, hos aah nck mrt waved 3 ne record high we bod psa one of ers ny a of he apo fre in on pie atari ihe Pi Air worst shod pe fs hich phe inet ater around the le A olla Aon ‘igh 1997 ad 998. A rab amor prices sharply lovee Tao soaaed commodity pice hgh and resulted inher sss global nto gta bonds ged sock tly n 1999, the longer esting fet Try An te ret ont pos demand fr nisl commadie mote damaging Fell Rewer to start rng ccpper ud alaminum, The Hie in earmodiy pies prmptd he rent che orate mide of 199, a move hat cotributl 8 major tapi he so Fallowing yor 2000), 3Crude Oil Triples in Price sty be tra wk cn ol pa ey ding 797 n HPS aay pe ec dat br oes dow te fllowig i sean ig cao yates ro a ea al ar rien AS oe ol rakes rps we ting hers. The ies “henge afi ida poss tom A a ec ere ks ll, Ding 1995 cer ars rn ips aot bays ana eteogset art (You'd ut te in the book why sen I vn tcck al market nfaecnnsesenery me ing compen) GoW 8 aor vm ng te lates poration sos nd intere rae sens ancl stocks ens ‘Wen no peo seg, sock atten usually Decor tack rat hot hese mato vine wee cary wang sis fn appenlng mart op aon Me ings eae tar nons, ll ie ao rod he Foo or aig ae ee ee eat 929 which wera sj reson why he abt opps te flowing er Toto ne | oy nr the thes oh cone ‘One way ol hone one ea aces um cncry ck 10 mo dese: group Hh one he ring 02008 ples ch: happen i - A Rise in Short-Term Rates Leads to an Inverted Yield Curve “the Fed sre ang hot ter nes tes rng the sian af 1999, 9 way dos when rans es aering om Sg. Fe re ure of 200, ha Fe ing 0 8 aan anne cae ere crv dct when short em eres can aes aly fe fs round of Fl iebeig ig eng pele ander cmon), atin al bee an si wean 30 co ene wenn Trees 170, 17, 980,762 nb en styl eres xl eg iter hr on rece Un hee ighen monty poly of olan inlon thes aes he wr dpi the como a he sock me) xc when th Fel be er aa reson ager te That ge it wa etd th rtf 2000 Did You Know alice jel curve sesont when te tr eateries ove sh Oger ae{Who an inverted yl ute eels, stock hat Boome the most vuln ae the with she hight rie agatha generally views the market et expec stocks), foe inthe dooms word of [eth start af th ew sey, thse overvalued tacks ape Ihvcnet and tectoloyy tres in the Nesta xt By a spring babe ly burst in the Nag markt aed he age bull market i itor ite kx pking be Nad a Lost Figue 41 shows the eco eminatel Nostag Cop rg the Gs quarter f 200. 1 ste ft mar US. stock inex to do By May lear mk ear marke xe when market fo percent otal, which quae aan fs 20 percent fam psi pa [ethene othe end cf Ang fore suring down gin. Later that ea the Nd fl below it tesprig low which ptt na major downtrend A downtend Is defined a series flower ihe a els |e this prom dstous for he Nawlag mae, Bei defensive market tors that sully dete nthe aly stages ofan eeonomislowdow, conser staph ond tis. 1 ear rctor ation around are opsin aster chpter) Realestate vest rast abo turned has mere rater hanged slong wth te stock markt, Stk ed to wang di ‘aig bee market in stack ecu oF tees tolling ates Ranney ‘eiicciGianicom 50 Chg 87 2839) TFIGUNE 41. Novng Ine lb ting 200 low which Dvr make ‘REITs Benefit from Falling Stocks tion parre were he tp-pfring tock ro at Api (asthe Nang stem) oe are cae cafr bor marketinace REITs ve dhe hing gong forthe. The st igo markt ne plage in Bos iste they pay high iene, which ave ig pln wih, Reese crelion wi he tck markt Area hey prove deri sane when he ack narket sin dine, Ted, REITs have storey had a negative corel tee tteloy rk Tat means tht RETTs Rieu ic when technology teks fl And Ahoccetily wt hgpened during th spn of 2000 REF nt oy dts tan the tock gpl 2000 jus the Nang peg nuke lt terms bt actly red Homebuiding socks, wih alo beni fom ling tees rats, ned pos wel Tipe 42 ssa REIT cored wp tthe ping of 2000 jose he Nang es peng sag are. ang ntenest ees aso arrows), REITs moral havea nego corelton ‘tree the ape of dvdend paying RES. ate senstvehomeing stock ao bead tom lg interest during 200, Kolbe rgd that he ber market in stocks ht tated thrng 200, an he gressive Fes casing daring ta period to waive he stock matt the ova ped exe th using bow at te for several yes before businger at de Cer Stocke td tou did't bof fom he next major ear martin stocks during 007 ant 2005. ta t,t clap shown tsk ped ete Tho colapseln etsy ty ding 2007 ma thal marke dowstn mach mare seous | tan the ne starg 2020. FCOMPO Waste Conposte) ox ‘oiiaciciarcor Seemt0d | Clone 204529 Volume 228 Chg +47 30(+152%)., fa geome (Hay 2085.2 [2 Rees painy 787? (W) Nasdaq v yn EM Ave Ny ‘eens ponies Fai War ART Way "Se Sap Galore [FIGURE 42, EIS ened up daring 200 sth avg psd.Consumer Staples Start to Outperform Certain markt sectors dy ster trent stages ofthe esmamic yele In the ey tages ofan “couomic dunn, ne othe best prfering sts cnimertps, Staples acoder 10 tecefmie mate and ela sn to tens i dhe busines eye TatsBecawe he group ontaits stock ke beng, on, oka, a osschld procs The reasoning that people th goup te it at Sa have to we those pect n goin aed bad. Relate strength ‘onon owing(utnb srna ecko how a markt group i ding compared 3 warkst Tenchu ie the SAP 500.) couple of her defeaie groupe a mull attract moncy i the tc sags fan economic slowslown ae heath cae and was, Tha’: even tr if the sock ‘parket delet ccnp yall terest rte, which was the ave ring 2020 Fling bond ks abe vidond-payng socks more trative, Most eesine tks lint tht ey elatve engi Wass Tow mat group Foy campo 19 a mate bene he We ee Wen bands al err nse vor didn pig tok the search or ae Figure 43 shows a basket of omaane staple stocks turning yp daring the pring 200 jos the Noda speaking, Defensive stocks wally do biter the ely stages of a market top and econo odoin Hcl cr and ties lo benef om ling tock market. expan fw sector rtton rates work a erent tages ofthe basins cycles in a ae ptr You'l abo ne dt he sme defensive roton tok plice daring the bee markt starting 207 COMPA (esi Compote) wox ‘iiodChaticom ‘oueanon "__Glone e520 Volume 220 Chg 14730 1828) aefit fons (Guy) Bete 2 aA Nascea eS ; él ‘ ‘Consumer \) Sase Fab Mia A Mg Soa FaT ig Sep Bol Wee FIGURE €3 Comuner staples tend wp ing 2000 an tr downtasted aerone oy we i tel when ring ones pl ae staring 9 sow Tere starts tos om economy ihn ark cp sock van spe Sn tha il (Shepherd the wal danger en srs in heck ret. Tat ws theo daring the ist ai 2000 ecomes evident en energy comune tales ar theo it Market Lessons from 2000 trae and economic anes wok together, 2000 Itever yar demonstrat how techni svat yor Tradl cialis of er go 00-day moving areas by major US sok exes reac eteviorten wee plainly evident, Ono those signs wa the bl Tig sows th SA 50 alin egy bo its 100 -lay moving erage daring the ec att 200, The 20-y ovng average ete ie dt vides map apres fom major dow tres A sigcantdopblowe tat long-term apport line 62 warning ht 3 apr deine hs peta ae ae he 20-day erage forthe SAP 50 cf tard down droge fourth aie F000 ws another cata cht major ew markt ad begun (se aro) Most traditonal tok et ech nds ere sing el gpl ring, 2000. sera waning aden fig dring the second hl 19996 the for af ing, eon pices and ing incre ates There ws 3 round of Fighting that resulted it senna yl corvedngthe st quarter f200, ei hd feo ee reesion (aed et op) snc 1970, Str tions allowed he equece that normaly ae place 2 the nd of dower te 2D dy moving average sua warning oa ma sous mart ee. TSPX cae Solaae ap rao Ro Dioacianzon Jopens00 ions Se volume 199_cng-ton4¢a 088) 7 tse oam ame Frstttn tsi [mace ara orgs | 1800 20-day average FEW Hay TITAS HH FIGURE G4” SP HO lke 10 day moby weap hing 7000economic expanse, What happened in 200 wae textbook example of stock mkt tp aan ‘ono reeion athe ming, Yet icey, mont of Wl tet tthe economies ‘orning ig eigen by inverted ve fin se coming or pretend ot They igor ll eteroratng price hrs a internat elo lags They eve goed hy The st npertet kn fa 2000 ats ery dang tensive on tte ao by the fancies he mesg bing oc 0 facet Meau Stocks ev abet For ofthe een an ha economy ook. © Bonds, Stocks, and Commodities Peaked in the Proper Order The orderin which tee markets peaked ding 200 lo insratv, Bonds, stocks, com ‘mois sl pel rough na prfiable order Hands normally peak ist stocks ecm ommotitie hid Tey so edt tom isthe same onde nthe sense, bonds became eae Ire for tacks, hich nur, cme ding indestoefor commodities, Stock pies sly pat six tonine ments before the wart of reension, When commas ly peak hss sign that rece bis tarted Figure 4.5 sons tt the eld on he 1.yeaeT-not yield pak ring January 2000 (et ov Th previous ptr explained ht illag bond yields ater 1998 were etal ba for stoks, ‘hid Become pany clear dang 000 (ad gsi during 2007. Aihough the Nang mabe pea that March te et of stock mkt eld wp for several mre mnths. The SRP SO di’ it inal pak unl heen of August ef ally turning dwn rng September (een aro). ‘Commons dd’ pak fr another ve months afer the S&P 00 “FINK (10 Year Treasury Nole Ved) INOX. ‘@itockchamicom Rbeeabeo Op oats Nias 22 Lo ea.0 C166,19 Chg #076 438%) = soasfiTo Oo ‘S&P 500 wolfe 10-year T-note yield oak Wy Bas 208 iS FSR Wie Apr Wig Tin Ba Aig Sep OA WTSPR (GaP HO Loge Cop lx) OX ‘Sioa Cast com ‘Jun2004 ‘Clone 120007 Volume 128 Chg #485 00.30%)» yh aera i= \ Aya Index joe “se | gap 600 \ tee be im CeCe FIGURE A Stocks psa fre commie dng 000 igue 4.6 shows the CRD nde peaking daring nr ofthe following year (2001. That we ve monte the S4P500 peak round Lor Dy af the previous year The eventual drop is com ot pies sally sign hata recession has gun os close to dig. The oficial reeson tego month ater daring March 2001 gir 7 pts al vee markets cm the ane hart acd shows them peaking in the sor orer (ons at, stocks secon, od conmodiis lot. Well see Iter in deol ta he three mar tetrad the same pang order ring the 207-2008 period, Hond yes peaked ding Jiwe 2007, which was bur mois bsfre stacks eked that October. Commies did't pk wt he flowing Jy FUR a Vow pees Ya La a one a1 Divouknows a I ae bose poking efor stocks spo ete stuck. Ae ‘The 2002 and 2003 Bottoms Reverse Normal Order Fue 48 sow commode ten pat te srt 2002, we ors dn’ tan wt ht Pa Bond lr dst ur up othe flowing Je 20) Tht sequence of Bsns Se cpt of thd fn which ae ice make usa stn When omg Part of he ran For the masta rest happens eters work, tere’ usally 26800 Why seein outa why yesotomed ote 203,cme fmm he Fd th normed sequester ban i ota uo et, socks Sond, rs as ‘The Fed Discovers Deflation during 2003 aterm trond since be san caren stad been warning af growing detonate eae ish ne counting melanins had ben adn forsee yeas onthe asim see arth dfn dheat wa for re Usfortely the econ commit (elaingb oy hap storing ling lation fing nee at rt gr ok mare san re RE as es ED ieee x sede Hah tom 2490 Cur e0 C9860 FIGURE 4. Tec mikets toed tfc ing 2002 a 2003yer ser he 1987 Asin i el he worst ar mre tc since he defor 10) Bec tagpen tne ping 203, th Fd aly expres const a he cat fo ling Picea, May 6, 20 the Feral Reserve amouced is deson toe hart term aes chug te 125 ect lee That rexel Wht wn expe the atm vel th ame day tate probaly fan were substan lin tion, hough minor, cae tat of pickup Baton om Ks leno eve "Tat tateent rk the at ie sre Mowtd Wr I hat e eld expressed art Jaton vasa grt het thn flan. The Fe od start lowering nun 201 jana new rece wasabot tsar By May 20h oer sr tery ates 12 Ges theowet evel in 40 year Has unlng out oF “here of he fancies tothe Fes amouncement of he defi deat pushed they on the 1-year Tren note othe lowest vel in 45 yeas Sie th Fs cool lower Shove ter tex char aher waa tha eight trying bons to one lng er rates ‘Taal contsbuted othe lange n bon yet ping That plunge porto be sor-hee ‘by Joe band yes state cink apy. Tha ria bond yk at aka was pe akong by ance talon ot find bck nt the tock rt, which hal tate a new bl market thre monte ere. ‘ne Fede zo nog gst bord tn 2011 nd 2012 eat of Operation Tt. = Commodities Turn Up during 200: Athorgh the Fe cout ower hr-term rats mock are oben, here was some thing cle could lower Tat ws the dla A fling dlr sone of the best creo allng prices, tice tps boost tation, Se ret abervers pected hat the Fe a ben allowing the “lar dpe nee rt of 200? in a attempt eat some inflaton, That spon mas ‘fred couple weds afer the Fe ised ts dfiaion warning when th Tapury Sesretary ‘nel thatthe US. gowment id abandone ts poly a pporting» tong dol Traders took tat ara sign thatthe gowtnment wanted the dalla tfllin oder to faethe ecanony. One pace that srotey worked wore commonly its “taers sate slg the dllor and buying commas more agressive. Cmmorty pies had alent ben ringer oer yer tanks othe ling el The US del ha in fact peaked tare art of 2007 anfha started major decline at ited through he nt ofthe decade, The (ili dene ws the wan renon that commode tae up 2 he same ine. That ay explin lyin dat ance, commode one efor stocks al band yi aca Won that he Tone bull waret in commits that started daring 002 wasa diet ret ofthe Fes lowering the dll tbat dao,inten The 2002 Falling Dollar Boosts Commodities his pte deals wih the msrp in the US. della ring 2002, hich le oa mor op: trond in emmy mrt, God experience a wor up bestow a he dlr bre» seven year support ie Gol end 20-yer ear ear market js stocks ended ther ee tall mrket. Commoditeoatperfrmed sterksfor thst ie in todas. pak in crude ot daring Mech 2003 cuted tothe tock make ope. Commodities Inflate The pre out dfition n May 2003 al the US rete’ abundant of i strong dll poly The plan wero are the della na ® % 5. The p 1 haptr mento he Fea en coe {erp to bost prices By the time dhe Fd became concerned that pres were ling, commesiy rt ale be aly for over yew Aft hat had t wth healing el. "The US. dollar hi al poring th fist quarter of 2002. From tht point doped hap forthe lace oat year ad for de et ofthe deca, The CRB ode (a basket of om user) recat the exact pin tht th dla peaked For he rest of 2002, commoaty rer contd an witervupted advance (whch wt bo oat for evel years). Tht action wat Trosient with the irmaket prince that fing lar alread a higher commodity ies That’ jest wt kl dain 002 Manny “Te complte nae tho CFE toe he Tho tess CF ge 1th the king proces inte US De dex at astelfom Oct 2000 0p, 2002, Chis refer to typeof topping pate 3 ead shouts op that shows ne pss withthe mile pea li bigher than the to sroueding pes (earns) That bath pte iecompleted when the tein avn vider dhe eo eatin Toss ken Dring Api 2002, he a7aS wn tin ee us. Dollar ah at 3 inde pues = Mowe Wh i y" \ in \ i Fig 5.2 shes the RB nx (commodity pr) ring sve ts 0 ming ee uri pi 2002 ot ast dle a reskin dew exe). The aby of he CR Index to igi Cs oa wo ‘cinco Geant gy 247 i204 cone os, chg 3800 180.5 CRB Index [PNGURIES2 CRD dei sve 200 yeas ey 202Tse Geet man eve Lowsosn ctse ess Oba 98! (3965) US. Dollar 4 1 News Hal [ae SE lind ove ts 200 n ws sgt chart followers tht he ted a comsmoities ws tng ecte fthat twat gpg while the dlr wa breaking dowm gt comncity ptr mor lity Longesinge cits gest ht ese ween nino a. Tigwe $3 compares twends ofthe US Dax to the CRB Ble ner the decade om 1998 ough 2008, The pak tthe dll wn azo coincided exacly wi he upton i he {inde (ap ato) ring spring 2002, From ht pint, the dolla el to the lowest level JO yen we he commarty index Wt the bight more din a eel. The 2001 Dotto incom prices preete a sucesfl ree oft 1999 otto. Tht forme alth de Fe ever ptr tht wacom the CRB Ines exceeded 200 peak near the (2002. Thowe en anges were eletywableon he price charts That wasa good example of he oben tata lating eeiqus with ntermarkt principles, | ‘otras stents boon tig. hema en es To ion 3 dle pees when a mae ows prominent toms around the same Feel fce ides)ascompletd wen prcesexced the ide pak i Commodities Gain from Battle against Deflation Ailing tr x ary cosre to flatnry. The collin ree aly pat on ta aleny sted to ph const prices sharply higher. By th nd of 2002, the CRB Index hers othe hgh level nie years Ts wa ear evideno ht he ling llr we Fhe deed fet feat sme commodity ation, Tat wat goed news for comma Nouvtsz0 ASNOW TYE WORE VO:mie povian soosts coumonitss | pers the erent wnt ee he dl at cea ony serve tbl nme tele whan hort einen me 1 ecommerce, nay mn comme mrtg wna ne s a got dlaion. The Dollar Drop Leads to a New Bull Market in Gold norerciy he primary Dna fling rh a art ae going soe ance ects urony sere sary betsec te drat gl ening ht ey ressomopeste deena gl ake ad arti during pring 2001 the dol rearranges The oak peak ine dl ing 2002 ge tbe ne urn veteran fe ger ast By hap, the dollar wn ma dete al oh cline ears Sto tee mein wos Gol-inig socks were ailing ight ng wi en doxl beeen om more nln olla Ko bene om angst mae JOHN'sTIPS “co andming cre ceoraly wera th amo recten. Te Sngest moves he A= verano er : Falling Stocks Are Also Good for Gold old pen 1980 e570 anal ben ling for 20 yes: Te tock mate Boned rae area ths roettwo decades Ta wax cones wih ather itera prince: ht {Pitcairn The SP 0 paket ok Seppe MD, Gd cs tne win tc ont (oven 200) whe gle oP sreiong ag 21, acne tht he rar arta seks string in 20s her yw bl kt gles sre ne emetic qusione he saying power oft lay on he oun Unt ok sea ona ie an here wore deftin thin Wt dey di’ el ws ak [puttin ne welding bth ifr detonation ae ed e170 nee ing gl prices nd ing ares relate tt Dung he ory parson 1928101932, gba ad becn taxed pri. The prio Homes career ed 0 perc dng as syne he ticket nt ere aaa re Golds colere tobe an erative to paper ws Noone ned nurs of SET dt bul ort n tc dng the at wo deze of ie 208 cnt a ede the ced f te 20-year bl urn stocks conc almost excl wiht ening of qh 20 yes kr ming. Te cnbimtion fhe tat oi weet ese matin es see the Gree Depend aot deration ofthe dtr asouple of yews berate ol the pol stones ot for the eso hat decade I DidYouKnow.2 t -Tedolr wasesently devel drng 1935 when th Ui Stes ase tego dal ad go! will ose aloe aQn uses gene Not a Lot of Alternate snininernaTon Some esa took th view tht gol wasnt mack of rete incited dave 9 poly ferro enh, wen tae ofthe mot comping rans why ol al wining as) ceeziegus vest The wo decade lloetin stocks jut ck Wat eter tne serine sn serative mr ie gol? Wht oealkeaaties wee there? Stxks were in major ‘pate tere tes fade tthe ovet level n 4 jee, making il acme vestments ess art of 201 bl pss US sorter ats to the lowest atte Twelve Fe aise tl tect ameny mejor adr contren wi he exxption of pan (ve tes were a 240), Ney make ads were ying tle ore tha 1 percent, Wi US, rex 30 muck we dat aaa mer counter, te dllarhed yore to go bt dwn. The fling de made th, bond: ech ven ese atte to fei investor, Acne of filing sok pris, fling dol, sean ow iteet ats n't eve people witha la a vse aetes Tha he Niet ofitermarkt late dt drives taney to gold That's exactly what : Gold and the Dollar Experience Major ‘Trend Changes ‘neo the main tasks ofr reading iso termine a wend change i telat minor om eriritrepeants a mara inthe direction of any market. One of he way to incorporate ets est htermarkt asl ft the pictre eo compre the chart acto of wo elated oc tnply compares tir drt toe if hey following the novel nermaret pattern Fecal hating dt bls for gol I gol string ose, th fi hing to do 6 todo sto lok the separate charts of etenine the dle tring to drop. The we hi ceric to determi the importance of thet epective tend changes Amir rend change ‘one ny ot jy ijrchange athe ote Thr respective trend pa shou be of sar aeaurteMgute 5s te sng edn the US dl ht te Fo 1985 tothe a a FD ras cna Tiles es Sa os gh ame Lon rm cae ome. cn since FIGURES. Dull bras mfr sewn erst Ie2001, trediv sd ater the dlls ection lows (Up teins are des pat at to the right unde prsius reaction lows Thee ec the move important it ‘beconen) The eats thatthe dor al hoon dropping toast 2002. Daring Dace 2002, the dllar ke the sing seven year een ce cle) bn har work ht ae 2 ae ye ad ainda of he tar amar deine inthe US. enreney. Abe se tie that the dela wae resin cous bre hte pice of gol was aero. balls move sow heater dietion, Wl ccs a good fr shoo es, wok ad many ts are bite ber tom tors ene Figure 5.5 shows de the price of gl deen trending sdewsy in an apparent bottoming Formation for severl years, Near thee of 2002, the price of gold rose above it 1999 peak neat §320, which pu fllon athe hight level in ive years ASie-ea high sien a3 93 Jor event in any marke; That upside breakout signal the start «major bl matt in gold ‘An upside breatoutacirs when a price of «market ries shot 3 previo pet, The farther track in time the previous peak the more signfcant i the apse breakout. T'am exellent example of how to lead traditional art work ith lntermarket principle, Roth gld and the dollar were experiencig major tend changes tthe same pont in tine. And they were trending In opposite directions, “upside breakout ora when a prnat nar aes aso vous pak SGOLD (Gad - Set Price EOD) ewe ‘@stockChatzcom a 2008, ‘Close 226.20 Volume 102.8% Chg 2.200879)" $6010 (Weekh) 365.60 20 $3 Gold [asim A Ny x KILWA TOWAT OWA TORRIOR RTO FIGURES. Goll sw Ge yer highend 202Shifting from Paper to Hard Assets Golds ten wed ae a pony forte emir omy ser Tiss probly de ot ong his oy makes with ory arate of ale tet tht the most reenable ofl decom {ie pte recto ofa a erison basics sows qt the prc of go mtn Ft rt neously the pie of etn or soybeans. Major wenn the price of okie ithe ed te or enced with major era be etre connor. cas “Got cena neo cone dracon feo cs cons, That robb 10 te suengr rk io dot. Gold sre oer $700 dung the 1970 whe commodity markets grup ween mar WP ren, Godpsted in 1989 Justa the como babble wa sing dn del forthe nest 20 year ar xoodity markets lout of ier Cll ile the detion of comma pees din pb’ pectin he atrctvener of commotion inveterate obo estos. Ae tne alles wanes pting rtd oda eter commodities wee starting eae nw anon a money fo thes tine 20 yearsat th expense ofan and cocks Pit nomce E “The erence of coma te exchange tral fam ETE) oer thet dec os vr ntng ng aoe commis cea fo sve nesta “Sted eth growing pps of connie. & The Stock Peak Coincides with Gold Bottom -Aemensone ele hee is aisorea tendency for oli prices to tend nthe oposite direction tances old eonadered abe abode nt fallgstok markt, ttdorn' mater ithe threat ve mdse oming fom lation (eth 1970s) o defo (ike he 1930) Theft ha old eibad wah stack maket-—btan alerate avestnent Gol ries peaked i 980d wer eet aret far nen 29 years tock bottomed dul 1982 and were bull mt for those "opr a ther werd the 20 ea ul mark tockcolcied with 20 er ae {o1L,Batht ose long te rents srt anging dso ght around the me ie. gue 56 compares 20-yer tend of ising stockmarket to fling gold pr Nov tht he 2000 pen tS 500 (own tow) coincided clr wth ato ne prs af od (up row, Wen crnidenc that gol toned juts stocks were psn Any ori comparion ine two markets wl low tht god and tock ually trend in opposte directions, ad thatthe trl mirktin stocks ede jst he no bull market n gold wis sting ‘onoreoin wy Wh Sos age we eto bust on glist hey now ang | (ole eum Dar sks11 (oa Set Pee EDD ce Sioa amicom SGOLD Gat Set ee Wolume 716k Chg i808 058) reap gure Giga) ane Bassa SY sap IGURE EG Gelb cole wih 00 sock market op im Gold Breaks 15-Year Resistance Line Long ern carta most sl or tigate changes Tt fr alla Wh ces ek weve at ve bs nexsenc for eae aly an ination ht vertigo pening aie in theater, we led bow how the breaking 3 See an sung tend bythe LS dlr ring 2002 coincided wih bls Beatnt in gol ‘owen that wasonly prt the interact tory As 2003 was ating the pic of gold ad ist teller nln erfv years. Ever mor pressive asthe fi th blind en bone 1S ys reine etal he yack 1987 (you's shh -That was acter ipo tant char sgn ht he lyn go ad sting power behind and was ore thn js another ly ing term dowavent, Something crapped tht gave een mot crit ode ptm in ful: Stocks were brag longterm apo Tine. ‘ Stocks End Secular Uptrend Ang ocr rt my he on ata eld ht hve re changes tht tart in 2000 wre cory spicing ft th epeated changes to ahsarket’s sar tend Ase ru cs vey lng rs ren ht can at fr dees, he eso ok and stocks, hel scalar ‘een ha tl for sree. Hates ne af those eel trend changing, cuore vay ned alent or aes Figure 57 compres th 20-year tre fhe SRP 500 andthe ol mark, The prc set th ih at cart ergs sae, wich measures percentage pri cangs inten fate ‘Rogen en wine only nore al on logs. Ang suport ine dawn under Cherenson bya tht ined the 20 yar aclu ket stocks othe upp igh ems the Su 300 ling eo Ut longterm sggort ie dring 2002 we cicle) That sged Unt de ‘Sa? S00 adendel 2 yor seclr uptend nd was entering secur ear market$GOLD (as Spa Price OOD OME ‘OilocCharacom eco ant Sones vane es ca moeaesy) = Heese ita! sap SRR 67 Goll beak 15 er Mens Lopate zara workable onlay chars ct igre 5:7 tows 20ers Sorta he lt Kaba hws spe Sfvve to ue The abit oF the gol market to gol ing above tell 15yea pat gol hd entered x ew zu ull idee eat ag ter vine waa ery onvncing market "Mot impresve ofall was ec nearece bingo 20yn sipport in. Support ad estan ar wed hare tc tt got wan breaking 15 ea resistance ie athe ome soap pres pnt shoes mat where estan (ing) might os of BY ae ropa (sng ey toc Taken one at time cach rend ans Fok Fryer le togetien thy tec ach ther map end ever Ug wan sperm cae snen hich at bd epsiznen or chang tren. eo Seen arco, nid abe sen that bot tend ees wer king lice te raed wore waelng in oppo directions. What wa bal for ope mkt (tock) ‘Smother gol). Bre oso» tiger frend ter cmt ma desert trnaround in ballon tes 2000 bo sgnled Mly mfr uptarnin como wee Tuttle ajo change nthe rcaionship tween socks and commodities enpont aedvsianoe porent mpl sve sa ts no ig) WH OE FB tana entra heft tng mea hit kei etwee asa ses | esSUT ISOLD GINRRATED) ROOM aca SRDS TD ateedae a vase oman Saat ane a 28 fon a | LEXY OE esta | ‘\ 1000 Dow/gol “oy ratio 6.00, ee “ TIGUNEOD Dow / Collate peda 200 ster 20 rhe 3: Gold Outperforms Stocks for the First Time in 20 Years Figure 58 plo yper inert ctr which the Dow eto hat rat es sree cs ol Average byte pice of go} The Dong rt fo pel ring ce fel drought the inna 170, Obi gll and other commode were aaa aa ets han socks dating thoxe years. The Dow/go! ato bottemed during 1980 ten commots pst al sexy ut 200, wen reached sei high near $0 ‘unin ue 0 eer, tsk weresuch eter invent hn gol commoies Fete 5 8 rage ow al ao peaing fring 7000 when Heke psd). Within two ear of tat sre rae bake alg eine ht ste othe revo two ces Ge rom) pera pic cots wed produce a mor eae lang erm reine. The breaking of ‘parang ten apportive sla change otha ete ewe marke seer bt gal ening se Th vent gad the ed fran st latin st out of aaa atatgeld ond ommederin general) The cart ao sows tht gol animes o do eves tn tis nthe ee fling the 2000 gk ue pe sola ed pn are eager ten From he are of 20040 he end of 2011 the SP 500 15 parce. During th see time puncte arog net 50 percent Gol mac te thn mot commis ee eit perso 99 pen: Welexpln in er lpr that ld een st sr Golds ved yy oes ran aetna exp hy Toke done ch btr thane como ner ee et ing cae wl tet ner when te rie of gold ing Tht cert ani one pe 53 compa thd ofthe Market tr old Miners EE (GDR) co the tee oe thet ec Asal compaon of hw ic shows ht gold miners ve done are thn ether ork sine 2000, The performance uber confirm the pve por sree afgld mre the tess he tr of 200, he Gold Miners ET nel more ‘han 40 percent, vrs 15 cent los nthe SAP SODGDN wie Vectors Gounners) WYSE ‘Ofiod Chaim rosaors ‘Close 2398 Volume 874 Chg.266.0875) ct Hh ee We Nie Gold Miners ETF (GDX) [FIGURE 6. Gal mines bv xpred SP 300 sce 2000 we mag ‘The Oil Peak Coincides with the 2003 Stock Bottom he pevou her feed the fing lr nea the str 202 aan explanation 0 wy ae rated upa year before eck Tat was unuseace stock ave a story of ing srt bot ering, oe hy commodity layed on imprint oe fn btn on ‘dies and toss) Tht bey comm ere i the pre aca oltre vp ping 2002 lang wih her commode th ale sea ping nd ented ol it he folowing ring A wu ce ring pre fl wa Tepe nck gre 5.10 comp the pre fret th SAP 0 dng Sat yar ig God Ol- Spl Price (EOD) ONE ‘eitoakCharacom _ Close 29.6 Ve --pae WOR EMA WT ASO ERY“re 200 FxttING DOLLAR BOOSTS COMMODITIES JOHNS TIPS “dat an ing cane leks, fahg ol pc usualy goon sock mate. You can ee both ines tending apatite dictions from spring 2002 to spring 2008. The So perear spike athe price af ere fom November 2002 to March 2003 (6 bos) was the erat of sor esa bul ito its a fn anpation of second aq war That upwind spike in sive during thse Fie on, During the the price fered hep stock pies on the def rock eh the nar actually sorted (March 13,2003), dhe pric fll ube 33 peeent (down sre nein the plage inthe price rude pring 203 coincided wi (nd pobsbiy “Contributed to) major ptr nthe stock market (4p arrow) The abit ofthe SRP S00 to rie Shove a renin drawn re the high ofthe previous ine moths ring the second quarter of thot yeor confirmed o charts that x eb marke in stoeks hal begun-—s bl market that tasted wn 2007onan Asset Allocation Rotations Leading to 2007 Top Tischtennis inkadenip Tbecwors net cn hic s neces ming allen nics, A major ase alien ht sock place rm pe ses to ard ate ring 2002, The Bote ato traced important “hana eer letwen thse to competing ants during 20, 205, 207, 209 Reto |n2007 lewd he nemanet scrip ey doe Stocks ane he dl el we go and Teaser tea ons, stocks andcmmodtes peel inte proper order ding 07 and 2008 The 07-2008, ‘rk bear mare wn bal. Cl ts become ven mre coc created ving dawnt Relative Strength between Asset Classes The previous caper wed the Dow lntis/ gold rato to compare the relative performance of olan he stock maketh chapter ilexpd that analy sing atl cast compare he Rtv strength Between bonds, storks ad commode to show whic of the de set clases ‘revolog bette aay ae tine The Meso concentrate octal the acs ae ding eve ouleo noid orundereght th ones ht dng he wor ortnatey rt darts ‘erly cay to compre the stenghor weakest ofthe three et cases. etn “Chart programs mae Rvs eazy to iota charts, | Rs chavtrca ap war of pening wend changes and a bea important uppement to vont eort nade Ax ol sein te blowing cits, one ned notte a chatig expert to ern fw tospt rh en canges. Mos of heed changes an be ey pte Make eelapents re 200 hve ped several striking eps of whys fmprtant tno which mares ate ‘zp -anilichoesre going vn ayo oko oe athe st ang camp hy ein wert gop shen oters go dove ook place during he month ating up tan following the 2007 sock mek,[iocsronronmonsumonero error uw Asset Allocation Some undersuning oth ie der set claesinteract wth cckothor is nportat oat est cae oes Heat ch a ulerstanag ele you aprecat how ote nancial asf ‘Mfthsce are ou interested in, Fr exp, very weal to kao how ands an stocks Tent ipa Wang sock, you sh! be watching the dection of bond i a bod Frc. That's bce the dct fd ies fers hts the ty etn of ok {yout s bond war, ysl te entre sreion of orks ten amp stock frre wl acted wh drop Tenury bond prs The rvows chapter owed ht 2 Ting dolor aly rods higher comma ries A ter chapter wil ao conse dat the rection ofthe dla ps detente the relative atuatvenes of freign sock compat to ‘hose in the Und bes, Forney ing cota ners US. tock, wea werd eos fo tock, ‘A second reson why its inpotant to wadertanditermarkt reins st help with the ane allcatin proces. There wis ine not lng go when meso? choces were in ited to bond, seks, ors, Aet lloetion models were based on that tite philosophy. ‘Over the lat decade, However, tvetment choices have bresdenel considerably. Sine 2002, ‘commodities have been the strongest et lat, and ae now recognized by Wall Stet ad the Investing plea iat sermative ahora stocks. The grolng avai of exchange tated fos (ETF) has woe investing commodity makes as easy as buying tock on a sock exchange. “The sme tus or currency markt Up wl cen caren aig was nite 0 pros: sional tr toes snares its Tht wo longer the case. Carrey exchange-traded fandehare pu crrony trading withineary ach of the average investor Aces to ern cess Icopockilyvluble in alate were the US, dollar i depredating Commodities en the oly nats hat ie when the dalla fills, eg carrencis ri 5 wel Foreign cose of ounce port commodities, Ie Australis and Cana, get a oable bos fom a faling dl nd rng ‘omer piers ouc on frig creney trading more dep tern the book abo tk thout golsoleas an aerat ctrency abd why comparisons between gold ad Foreign currencies fan be ery wel, ath isc together, bt noe necesiary al he sae pie The Relative Strength Ratio “This to ptaps the most important tool i aset lean and sector roca ‘Sector retain refers to meerent ofan and ox of vara stock markt sete depending + on the tate ofthe bins eyleand the sock kt, Mot of my ntermart orks on lo: pe pefermmnce_ Relive performance compares (wo asset cles or markets to determine which he song othe That's done by plot elaine sang io (which ao refered 0 a nth RS) The late strength rao (rine erst by diving the pre of one the pice of snot which easly ane with any tring rogram‘rag ines not fen tic tte tom fork ato meas exe oc nreag ip fe SP 509A rig RS ean these te han he bode ey cea spss fra sk Ratio aa. bn be done om mat eer sd my gape ch exter eh ample ver eatin ae A i at daa ere ste is caperfomig th rest of he ark oneal beste to bein carina tga (vat fons wth liga) We lw iin sere cloer ntiseaptr wing te eave strenght fr flan purpos ‘ey to tats can be compared wth. + 2002 Shift from Paper to Hard Assets “The previo cptrnplye cane rent irdeto demonstrate ht pied ace utero th stock ast ing 202 forthe st ane i 20 years. hi cps rung espe reat thet commndty ect ca. na alain woh senae tks conpie the etn promis between at chs (which acta bond soe ar pees dtein which ones ardent, Lert wih he elas btneen ‘rocks and comedies, Tepe ts arto the CRB ne commodity pres ied bythe SAP 0 (ihe he eer ttl), Daring 29 yesre between 180 an 7000, healing coro? aac mma da cocks were th song sc las. That treo change in 2000bt cd's racer roo an 02. During 202, the CRB/SRP ra bok a dann ening at nd rae aude the ape break of tt joe rendine dig 2002 site a generational Mt ve Stake ups) and into commons rad se) Bye idle of 2008, coma ad ot the hh ein six et Dring ie en yes etn 0 2008 eis contaty markt npc stk gis by afar fewer 0 oe Tonto tigre 6.1 wc tine pe ee whch more ttle or Sng suet ‘sno onde ent us st spt wpa arn ve enh a The Commodity/Bond Ratio Also Turned Up ‘hej perdi i commiting In 202 dda’ come a he emp sf oe rane tape fonds an wel Pee 6.2 lots rata the CRD nde ey he pee Tine Wear esny bon Th oma bd rat ako btomed ding 2002 ie ein sngtor mon a 20 as, 1981280, pe eo and tak) war ino al dee lecommsite (hard ast) ween a major den, Between 2000 ad 7002 heen,‘pas ceass) AE ASPR (ICR COOTER SOO) OTN Bare “opesony Haka” Lowes i Commodity/ Kia stock rat FIGURE 617 Uprenm cnet /anc at pel mor ait commie he endl stared gay fm onan ck, and ack comes, Daring 200 aan denn sap nication fa pose recension. Asa rest commodities ar “Jaen upapada 20, Bonds lim 2000 he eel of 2002 tok pie Spann of 950, ones te bora stalled sts tome Tits whe he coms! ato turned pa dese fishin mnt oetinued to ogo bos fo ers ser the ai turned in 2002 ‘Turns in the Bond/Stock Ratio Lets now turn our tension tote eaonbip Between Bonds atl stocks, Boas al stk at pecompetng ernest mney When trate mite te tk kta he carey ly purer in tock alessio bonds When thy ae ote esis hy sey cl refunds to one ess tock, Onc agin, that tenga rceoy teapot wh of thw wo compesing uses doing beter a ay ge Une FORE SUSH ROOD E) MONE, Todchanacom eee eee) figh 9.1 Low290 Close 209 Chi *0.10(+6:20%0.= Page euse cai) oe . Commodity! Bond ratio [cmos ae sored a2 ae a TOUTE @2 Upon acm do sii major sito omnesFig 6.3 plas a at ofthe rc the 30yar nied By the SP 50 fy 1993 ko 2006 th sonst tat aii th late performance. Daring ofthe 1990s he flingband/ stock rao man hattorks wet he bet peformer; ring 200 bowen the tond/tock ai raed yp (ee wparon) a tocksentered x major bear rt Te apr nthe reo cane mone vice whet ok ano nie dra ve the 1995/1998 tps Pow 000 ta the elf 2002, bom rcessoe oy tocks ell An vet sing tk at cok Je bent pretly by itching tober an out of tack ding thas two yen or yer ing the also wiginga sor ans. Wenis carga uc TF oben rc stocks mal vr oy t a ses betweon, “Tiel nai spell pal i sporting train vive tenga, During an ceonomeslowdown a resco lk he ero fem 2000 200) ond pices uly de beter than sock price a the Fe lowers short-term atest tie the economy ‘Bond ikl sully deop os well bon! pres ese That makes Treasuries af haven ina lowing eamomy a fling stock marks When th stack market turn ick p (858 2003), rch sut of bonds and bak int stocks. A hat pois, the bond/strk aio turns down, “The ck igre 6.3 show thebond/ stock rato peaking near the end of 202d the stat of 2003-the downturn in-he atto wasconlirne by te being ofthe sng rene dra ver the 2000 and 2002 ows (down aro. AKowgh the resting ofthat rising reine ding he ociciatszom SRP 5) ROXANOX eng 00004205) > CE eT ew [FIGURE 6 hond/sock ato ned wp ring 2000 uns x20ds/aNiou sunt sxentsean i of 208 cane eth po a ing tess fa me sh in the cer paket war lend vet uh oe ane he angi he ide 0% The hat sows that Ahr pated in to taza 0 P oa th wth tr fe sing prove sto Si nrc ho start stator lm abl tap inte ato A cee tp prominent The rat wi cps one daring Jo), The cen ps es formed he fy. Any ta coetist lol ave rors ate iit Jenpin the onl stock tt sowed he polity of ey vig wo dint peaks. The pence th de rtd pony lear (se a0) I iano Fem owes re wes lloel 1 er mote pein ce manera pe the 30-yorFbo out tops oro ay eats on chars a we er [\ price i Iy u SW A ty We Milani teak Woe \W ly nk wen 703 9 206 it ut of stocks nines bond Agree od easing to stem the dep i tock rcs dow eth sing whet pe interest ats lower (an ond pris (Geng om 3 igh) The olla fl spl aa rest, whch pushed ital commodity price rove teeter Fr three urters tating in Jy 207 1 wast unl he rc pcs higher, Asa real ond Towing fly hat dalla bts cased comm pies to weaken. | men stxyeg he aor batween ay yo mats, alco nessa 0 know what’ ap fering thor mas, AL The it down teow in gure 15.3 show the CRB index pean Jul 2008. Ding theme Yl ofthat tout ea pnge in como (an stock prize elpd ps easy bond ces arly higher Get op are). Frm ht ot on bond and commodities prices revere the more normal eto. Daring 209, bottom in coxmmodty prices (ad tocks) retin fling Treanny prices Gee arows), Acoma bounce dung th second lf 210 saw abo pallack. A commit corecton starting ia th ping of 2011 (ling edn) bee produce Strong yer for ses ng ne). Copper versus Corn during 2002 Figure 15.2 showed bran commority pices hing ogee ding 202 i to ely tar tothat unas yar ocala wh that happened, One reason was phe tha stork psf “Sep drt yer bi eed psn prices higher, (Chapel expsined Uapeg Ing dllar dering 202 cane commodity pes oar up before teks which ws ao wl)je Treasury ‘bond Another reson wy tan an commeiy ris yose together during he second half of 202 was Theo which commode dd esi, gure 154 compares the price af ora and copper ding 002. vou can tendency baton the wo conned sartig at mi-year Between Jove snd September ear et ator eal) pie rove sharply ata reat dough condos nah Mtv (operon), That sharp rie nan prices prea big boos tothe CRB Index. Copper pes, owever al daring ht hil quarter (wn row). Grain wakes (which eat to weather) were i nt i 82 sei copper lc mor onl tlt the stat of heen sling AN ok “uence a ain, Copper aeoded sme sge hat the economy on boc Copter coast han ar, Copper ae te ei aac pened bor der were concerned byte weather nied el ‘Moores during cnt af of 2002 dre conned wih he wea enone mee to pnd he gran plz gr athe Feary atllgope rc So hey hei on tothe ac of ing CRB ae Tho in of eonparls pte tober pices Did You Know. Capp tome diag Octobe 2002, is when stork pes sn non ond pies stare weaken, A Comparison of Copper and Treasury Bond Prices Bond prise re daly ed othe drcton athe canon. Avante sony prods Tipe bond pis (nd ows bend ye), Cares stronger cen rein weakrbonk Free Gnd stone bon ck). OF ee 19 commodities he CRB ede, copper the mot Tel ed eo the coomy.As asl oper very ly dhe end ofthe bod mart TEE EE os ee mater neem Ay ethene wel 3 ey MY a Treasury + ey yes 22] bond irs rel price eo a [ee , Ne val a fos ,/' copper i" ” wee? 2 FIGURE 16. Comprion of copper an Tray Wo riceCopp ab lol te nthe aint aso he pl sco a os Figwe 15.5 showy he geal vers ela ete cop any bond pet dateined between 200042008, Copper pies long ith stocks ding 200) a Treaories ene pte copper ding ping 2003 (8 up arrow) con witha major pak The ‘tnt pie it den aon). A downtarm a cope ding he on af 2096 (ond enact) concted nih an perm nessa prices (second wp aro), Bath rose together ftom wl 2007 tcl 2008 for reasons expel carer (having odo with illing stork ar etn la. Stocks turned up with opposing 2003 nao cus money trode aut of bord ain stocks _nimoneie “The Gc areal Figure 15.5 shows the emo markets diverging 0 # very dramatic wy nit 2008, Daring he nde ya cape pres ang (log withstoeks, we're Ty pres some ir Tear bond ples ig 2008 a! planing copes prs wor ln epee cen enon, whic aed rough eie eSo we th ange Instock prices, Duroga rexsn, coppe and txk prices unally ‘rn bon! price chat wt appeal: Tat ear coion ted int rng 20, when al tree mate experienced majo tr in the oppose rection “coors an exc aca ha song erwasinas of he gel econ & The Copper Bottom during 2009 Contributed to the Bond Top ting were cone in he din mil with he ik beeen cope vl onde Tarde seorte those tr markt fom he stock markt and he wate of te ltl economy When tay terrae Dwsnywo mael, portant oremenbor hth ae Fete ores ork Wes tht ring 202, and gs fom he mille of 2007 o 2008 A pans and commodiles diverged from Bie normal inverse relatos, Tir Inverse Kk Trertedc to orn i mil.2008 al remained nat nt 2012, Tipu 15st copper onTcnor bond petri opost eto fw mid 2008 int th fen qunrer 012 The Correlation Cece along the Botan of igre 15.6 shows ening coneation btn he wo ats for owt ft ine pil Tent dea ra tre pane in Treas pres ring the ft al 2009 (rat dew aro), which oie with opp wpa (rt pao). 2 sovaxos siz ozexinmnuxo> ste axnina wors0d was00 31Js Treasury bond | price aad * [Nogative correlation “his ether evap vl of ac mats siping rain te econ, emer serene “her prcerileddrng teats 2010 3 copper pcre oe town). Hea Ingo 201 hovers oper pice wre osalhing ile Teas were ling Davin Mart howeret » dowd coteton in cogpe (nd mos other commas) contribute Yo + nor ptr Tenures ero). Anat hale ected wa op in crmmaiy Frcs da spring ve wait ll ok mats were vlads cretion, Pose elveed ey tema. Aeris nope Unt year alo cad he Ero to tmble an the Aalto rise The combination of hing dlls daring 201 an fing commodity price reed vey sete our fn noc Tern th yw caused Foreign markets fal farther than tS Jocks Aitough U3 sc bey exaped x rar market which eure a op of 20 pee orig tcf webb ha bac bt theshol That wa esl tue of emerging ae sete Bron and Chin, whic ate el a crimodites, While const rukets copper Tt rund daring 201 Tewory bonds haley pital ye. re tes etn song with stocks dig th Fourth quarter of 2011, nd entered 2012 cn Gomes fot, Sock one of thelr stnget nn tart yor The US. dalla weskened Stock pies ad pin hing of 20, which ced he a ma 10 op. The aac eed te mile of 2008, wich ws reveal mont copper stock, ma ond lls bottoms, eeeth sttion in Europ sida the Ero lied The weaker dlr il 2012 alo ge 3 ‘oow to foreign stock matt whic bl allen the ont the previous year. Copper ale 5 wel The fa icy of buyin ong date ressries hep nl ics depres daring the st quarter 017012 fete ceo ang stk al coms pice. (Nate Alf those trends eer ding “he vc qurterwhex ater drop the Ear (and ng dll) exe downs corrections Tac ommesties Gluing epper) axes ton prices vos. Those trends reversed at drag herd qtr Trey bonds waked tock and comes Bounced daring the sarme of 2012-The Senter unc f QES tree the trends af teks an coma tipo the dollar Teese weakened) © The Thomson Reuters/Jefferies CRB Index ‘Shc CRB Index pla suchan important olen ntermarkt ays, t's goto now eat wha Ftisond whats inde tithe oct widely eo Brometer of ren he commodity lever Kaho as he get itor The CRI dex was fi publi bythe Commodity Research furan 1958 and egal cael 28 commnadies Sine den, there ave een 1 evsonsto the ‘commute That at eon at dane in 2008 TheTinmon Reuters Jes CRI dex now ‘Rees 19 common, ao which ar traded on exchange in the United Stes and London. The (Crh tndes frm ince commodity contracts at ke win sx months of he arent te “The ERE grupingsacoe energy Crude besting a alee gullet gs), nd ‘wink mts (laminar, copper kD, precious tae gol, ser, grains (soybeans, hey tpl con, cafes sg), agscleral (cotton, rng ie, ad Nvesk atte, hog) The Fewest ighted comm goup x nergy, whic aay makes up a Test 3 percent ofthe CRD cing Crade os th sil gest CR weg of 23 perce. trl cals rane ‘rent ve equal weightings of 1) percent each The two predous metab cry combined weight SF potent (gold a6 pent and iver aT perce), The we mot wel Ttlowed prope Ft ergy ad met (India andpresios) Bec af thir mgt on ition aed interest aes ‘lll economic tends (Although the erplte an far th des ite Thomson Reutrs/ eis CR Index, mst make followers use the sorter verso (CRB es) Maines charge ade fits ET) et hat low odes oy and sa base of commen 3 ‘no cay gous The CRB Index/Treasury Bond Ratio ‘ne ofthe ost we terre instore that ee arto of the CRB de vied by the “Testy Bnd pice fst nrouced the CRDbon at in my wo carer termarkt books, dt contin Gin extemely lel, The nt det se ofthe ati sto determine whether Tul commode ar the atonger xst clas at ny pint in time, Bat Kalo hs at of ther Apleatons bye thse two marke, a yu cin the allowing char gue 15.7 plot 8 ie ofthe Cx dc diel by the pice of « 3-year ressury band over tel ves decades. “The commodity bond rai peaked in 1981 (Bt dora sero and fel for dhe allowing 20 yeas, etncen 1980s 200, he fling rato signed tht Teasury bonds wer the eter place to be. 205g The reco dow tou shws the aio plngig ding 197 and 198 thereat the Asan canna er chao feel ns), Theo a ge the Wales inp way to econ Shon he eatonahipbetecathe to mars chagig That took place ring 2002 when the heybondato broke. iting enine tht len fect for te deca (ne le) Between 1 ands The tid dove aero hows the 202 208, ising ata one conmedty et Callie nthe ati ht oer during 2008, we commie angel a etc up the sory om ve = The Commodity/Bond Ratio Since 2008 gre 158 pls the ame CH ndex20-ea Ton rt rom 2008 it aly 2012. The end line demon the char alter to spo thet. The ist down aro shows the tio png Ign the wide of 2008 daring the eight of th isc es, Clea Bonds were the preferred se droge secon ofthat ear The st up arrow shows the rat atoning daring the fist {ure of 009 and ising pring 2011. The ingratisgled tt commodities were the bt ter markt to be in dng hase two eats. The second down arrow shows the peal swinging Back to bonds ving spring 211 I eathing es, the CRB/bond ratio rs vble way to menue the lane performance of esr bonds al comodir andi decdg which oe to fr Bat thee something le: how th ratio faflaencs the stock markt TRUST GC Teac ROH we Tieatncan eae ‘pen 54g? Low221 Cone Oy waz et0e5)" CRB Index/ as Treasury sa bond ratio a] | re | FIGURE 187 Conmoby/bool ro oer bt ace deder, |i FEROS wos ET aT ma. Faaione " ‘pan 222 gh 22) Low 221 Cloue22 Og 991¢6275)~ [Petites ain 28 leo CRB Index/ pe Treasury bond ee ratio ‘ === [FIGURE 18.8 Comma Tearery bol ato sce 08 = The CRB/Bond Ratio Influences Stocks Figure 15.9 hs he S450 (old te) othe sme CRB/hon ratio shown he reo fig “Thechr shoves that he dition ofthe CR band ati lo aueces the direction ofstocks Both longed arog 2008 (st dor row) ad toned up together ea the sr of 2009 (up arr). “Thay ten rose together ail apring, 201, when Bath entered daensecorreton cond down arn), Arising CR/b a0 sige that const prices ar stronger tan bonds Since stocks ‘Commodity ‘Treasury bond ratio FIGURE 169 Commoty/bnd rato uence markt etosee pty crtlt w commis ad mer cretl obo ing at ba pos ‘Getin of sock, alg eto egatv oe rks base pies th the flee on the nha nes he CRU on rat a etr for ‘bn pies ae ing adeno ln ‘och But Ghat as laren the ee Mines ‘ring CRE bond iodo avr ener eve tock UES. fi The History of Commodity/Bond Ratio Influence on Stocks igi 15:10 compares the CRAY Treaery onda (nll Hine tothe SAP 00 (gray ave) al the ‘rota 1980, The prot ofthe chart ct show ht he nen ofthe raion stocks changed ‘rer the ht decade. Berm 1990 and 1999 (tthe tf the vert ee, ling CRB/Dond io was god fr tock, Aer 1999 (othe igh ofthis, x lig ratio was for stocks The ‘relation eoefcion nelelow Figure 15,10 shows «nyt coreaton betwee th rato and ‘oc pie 2000 an ate creation ier 200, {Caper 3 explained at the delatinsry thes fer th Aslan careny crs cated 3 mor coping of bond and stork pices (nd 3 loser nk etween stocks and coro), Pio 0 1998, ring hon prices (wd fling commas) were god fr stocks, Sine 1998, vsng bon ric (nd ling como) ave rt stock, The CRB ratio provides x witha simple way {mest theintermattetretionsip between the bce makes Since 1999, rg CRB/bood ro bastecn«pstv nesta or stocks FIGURE 1510" Hisery mend ond ate uence on tock areRET ATS ROTA Baap BIT Seats Seas ah Lema e229 S84 Basic Material SPDR/ S&P 500 ratio [IGURE 1017” Rang GRW/bon at for material sols ‘@ The CRB/Bond Ratio Also Influences Sector Rotation Figure 15.11 compares the CRI/T-bond to ol ine) 0» rio ofthe ase Mater SPDR (RL) vied bythe SP 500 (ci re The are shows thatthe ction ofthe CRB/tond rio Alo ltlaencs the lane performance of atrial tock prices, When commode ae rng aster than bon ring C6 bon ati) tral tocks sully oatprform the stock mate. Tere eto retno frat One simply efit tht ater tok pice ti tothe tend of Trodity price Asceand reason that ster tock are abo comamicly sense, which mens tbat dey do beter whem investors ae more optim aout the stock market an the econo: [tnctame ict for er eyleal stock groups ie smal cps, consumer dcretonay nds Iramportton, and tec mology storks) Fgwe 151 shows tha the ype and downs inthe eae performance of mei stock wer cll Hed to the rend inthe CRB/bond ratio betwec 2008 lin 2012 The oppose tue of defensive tock he ties. Aating CREM ont vars done sacks. gue 15.12 comps the sre CRD, ato (oldie) to rato of the lies SPDR (KU vie ty he SP 500 (oe mate) between 2008 an 2012 You ea he two ratios ret Ings ope icin Between pring 209 ancl 2011, sng CRB/Dond ati shows ude formance by wit storks (ent eins). Daring 7011, hese,» drop inthe CRB/bnd a0 Ielped make wy tc that y's ong ecto cond two arrows}. Although he rein gure 15-2 ms the eporite of dt in Fg 15.11, the reasoning hese, When the CRB/ ‘ond rai eng neto favor econ este ck raps tht benef fram sbonger ‘eomomy, Alling CRB/bond ai favors more defesive stocks groups like consumer staples aud Utilcs-Tat ites the CRB/ton ato a fl instr Fr sctor tation purpose 3 : :‘THE LNKCBETWEEN BONDSAND COMNODITS TREISD HS ORT ese NOTIN Gyan SS a2 Claw 222cagoneoohD j i, ities crBindew | spor Thondratio sap 500 be \ i Ratio : The CRB/Bond Ratio also Influences Emerging Markets igi 15.13 compares the sme CRI/Lond rai orto of Emerging Meret iShares (EM) vie by the S500 Beton 708 mn 2012, Api, psitve correlation cn fe sen etwecn thet ron After ling diving 2008, hot ating tare pate start of 2009 atl ose together ‘Hough the cn of 2010 Bot ration correct downward ring 2011 before sabia at the start (of 2012. Arising CRE/bondrat sed poo galt lbs vader. When gle investors are ET TROT ES Sone psn Man La200 nnn Fascesesiaaa CRBTIT-bond ratio Emerging markets! ‘S&P 500 Ratio| 1 I | | | ‘opti, theyre morenclined ko inves in eer merging mares Sn emerging make ate tore sly tied ote eed of comm pes, sing CRB/Dond ati alo se sig traersthat he ernest emeglg mats ae inproving (Note: Boras weaker ding the second quarter of 2012 ble hing agin ove tts) oncsncs erga morass evry tenet acto of conmoay makes Another aspect of te CRB Mond rat fe one rikon/sik of nletor. A rng CRD! ton ato vrs ress Wk commas, comedy currence, high yel boos, eens mus, economia sv socks, and toca in genorl A aig CRB bond at ors rik af et kc Treasury bn the U.S dala nf dfnave stock group Foal the reson dese Inds chapter the CHR rato ery eal tnmaket inde, = Commodity Inflation versus Bond Deflation “The peeceing charts sw that bond and como prices maintained an inverse eaonsip oe rot of te lst dead As 2 result, comedy pies and ood also showed tency to {ten in the some dietan most ofthat ine. Band yids, however hve kept pace wth rng tummy prices Byte start of 2012, an umauly wide screpaney existe btcen th to ma fete Big 15-14 comjres te trend inde CR Texto the 10.year Treasury nate yield between 1980 snd 2012. The tw markets trend i the same ection pit 2002 (li of vertical, Since 2002, wert, canoe prices have verge Fom the bond yl That was expec toe ‘ewe 200? al 208 Bon id ee with commodity pices betwen 2003 and 2007, bt nt TR (oye torr pe 2 mp 2080 Som Fe Tavear eel T-note iS yield * CRB : hy Index J\ Al o a > VVata mck Ath hy dened oe nti pin ding 2010, bo dnd washer TD et ee deren tense oo at aleve een mee he aaron af 01? when ad tonne lows by he 10 eras 420 se op aang prices Both ben osetogether during he thd quart) ‘rasnerston sow ofthe son tal bond kts fen wh como “one eon for tht dscrepancy ht 2 weak cae for stocks helped ph ord pies higher ad ys wer Ante eno Bod ce aig ows been the smut azine sean pty bythe Feo amb fain That per the boon cre pris tung 007 ulti or th woe dol. Te dry trend in wig fe 707 so Faden ect on ond yc encourage he ed ph hem row The Fel he epee ts near see sce Dacre 2008, The two rounds of gate ea ears he srt of prin tin the wcoed nf of 2011, comtbate othe sharp dep en ely hc buying one oun of rey cates. Tempe money HPY eee y the Ra sedan rs, which oot commodity prs (tweaked he ‘Thayer ny twee be anther eplnation why bond yl tye slow in tee of ing cramodity prices Thacbartodo with competing ems coming fom As Do iow Kno — “open ist bong age-atl bdsto p bondi ower Hong Kong Stock Index BeEEEBEEE TGUNE 15.48 "Contec bern ung Chines sts camodies| Commodity and Bond Links to China and Japan. Figure 15.15 shows.» ng cretton betec th Hang Kong stock make andthe CRB Index rth st doce, Chinas ben the work's gest inporter of commodities ove that dee ‘hl barged ht comity nation ing doa emerging Chins (ih lo ighten ‘oectay plein oder o combat ht ition by the eb of the decade) The opposite is re of 198 and remained [apn Jpn’ GDP price tr (a esr of rice ends) armed neg Macao 2012, That a eed in 15 year of pes defo Figure 15.16 shor rong covelaton betwee he ili spaese tock market andthe 10 ear nate ie since 208, cold barged hat paneedetion sone f the reson othe {etion a Tresry bordel, Chine and apn ae the wells coda third rest ccono- Ines One ofthe is ating nition, whi th ober baling deftones’ seth he inition so sigest th tov competing ends in the tw Asian glans ep expan the coe eli a ean i fl athe Unt States ten of oe © Summary ‘hs chpter ends the fourth and fin partf the book Chapter 1 demonstrated the strong emdcncy foe the U.S dellr and eommolity prices to tends opposite dictions Chapter 1 showed how stock el commodity rch become more sel correlated, espe sce 2008. Chapter 13 ‘plied he verse relator betes sock andthe Slr oer he st deca, Chapter 14 amined the inverse lak between bond and tock rics, This chapter explored the elationshp ten bons and commas, The nkages coveredin thse ve chapters neue al the mr imermarketrltonshipe ht canrenty eat betwee he four asset eases ht ate bon tok, Comino, aod eurrendes. Deflationary tends oer the It decade ve change some ofthe a ete rere aoc Tokyo Nikkei Stock Average TOUR 116 Connects bn ling one ks an bo yi sevensnana tons tht essed ring she end half te 2 entry The carn! elton ‘hip expla m Prt 1 comprise th moran intent rani a ty x to. the Concho, slang withsonse fil oughon "Tae mene bonis wit sted pin the ae nermarke ras plays esc market sat The Conlusion wl bo lfer sme Final thouhson whether te Fslepbey oF kop tes 20 low fr solange helping or bring Fock ark, Hor ny old sme cies o that answer The bck wl end with ane at me turret charts toate what lcs hey might od fr the coming dele, ‘Answer oloning questions 1. eau banc an stock roa uy Yer sm sane deion bute cepoate docton {2M roman baw tho 2 High ue bend aay ee ‘tn same drecten at Faas Doas brite same dectons a cts ‘8, Caparta tors separ Tees when sack cs fsa bFaeg 4 Fis cormeny oe vamos Roasuy bere 16 Fa 6, Araby CRIVTbo atlas 8 Gon tote cond or acnomieay sense tock ado oni tacks d.AtelmesbowConclusion It’s All about Relationships [crests el ess ae wes designed vo ‘how ht lly rete nance markets ead ote npn bo tha information can te wed timprone the ores proces. "hope ve suoecal a cnn you hit intermarket els slo an resin portant porto ech aaj, Corbin: between the vats financial markt oe the ast fe yor Free gotten so strng dats wary imposible fo vndertand what’ happening in any ne art sito owing who happening inal ote othe makes, The Four man markets m refer Ting to ae hn tos, emmodte, aed cores, Bat goes Frter than dt fee maset ‘eu plays an portant ole nae lotion ap sector otto states, both of which are Ait the tsness eye, Exange red finds (ETF) hve greatly flied the application of intermaret strategie nd ave de mac eset keep rack of verying “The influence ffrelgy sock ako ply 2 eral role inthe US. soc mates, Global stock nalts are bight comet's dangers to sale the US. stock make without looking a ‘tenia forjg markets Afioncl rss the Euromet onthe trend ofthe UL. dol, commit pics, Terry bond sl he S&P 500, Tends in lr energing markets tke aa an ina oe ccs om nm any TY bans ‘how during the day a you'l gta erp of markt evens all over the work, What happens the yg the day ad yl get reep ings what happens ie Fortney ot ht a to Rep rack fl hse markets All you ned ian internet web st hat gives you the ily to chr lal yar and some bac chart renlng ilsYou don't eto ea caring expert Most port tend changes are pest eny topo Bat yu have That sie tat yn actly ese end changes I order todo tx, youhae to look at charts. ‘ton ose base char resin sill, you abo need soe understanng of hes pines ‘twxermaret als The fon va recap ofthe most portant intermarkt principles amd relitos, 215216 o Recap of Intermarket Principles “The basic ntrmart pines are thes: ‘eA potatos ae ined to ach tee sn Analysis of ny ne markt should nce aa ofthe hers stock, bonds, commas, and errs Inceroaskt rl ine ‘The dalla and commis tend in oppose directions ond prices and commande tor nopposte dietons since 1998, bond and tack pices hae red inversely. since 2008, tucks al canmeder ve been more cosly comet ow they inert ‘eB usualy ange ection before socks ssStcks uel chngedreton before commode ‘eBond yields peak fest, ck second an commoiltes lst et top tan boston Foreign influence: sll global stocks are dou correlated fA weaker dll or fog stocks, fA stronger dls foes US. stocks sstmerging ketene ltd commodity a 8 The New Normal in Intermarket Relationships Ath the bse necrmatet principle covert thir book em ety constant ove tie they ‘ho sometimes change. Wh wy, Since the Alan ‘irency crs ht trtedin 1997, th tre of bal dfation st anged some ky intrarket ‘elitonhips, The busing collapse ding 207 aed 2008 rence that deflation thet. The ‘hsjrtntermatet changesthat took plc verte ft docade are ited below: ty do tangs, omer there's aly 2 res since 1998, bund and ck pics he ended in opposite deco, stock an comma pres hve become mor ighly correla pel since 2008 stocks and the US dlr ve bun septa corelate || | “Thereof ourse, gts ta howe nw arm intermaret relations el atin tvoughot the coming dec Te het of deflation fer 1998 asthe mai rower thse newer ‘eltionips There’ posta the hage amount af exces quit being pope int the lta cota by otal banker leven res in igh inflaton That may etse some of the term reltisp tos gin oad to at ne ensiranment Theva ole shown In this, ower shoul help yo toe when tt happens. » Fed Policy May Be Interfering with Normal Bond/ Stock Relationship Since 1008 the eral Reserv as mbar on a eer meses to hep tres rates at is tory rls Tee ound of guna csng, pls Operation Tw, wee deed to ps "Tear bond els Ios ed Bep then peste. That was dan to boost uses ad connie ‘orton to help revive the hang Sn One oa of that pic is be 1 encourage investors to ne matey ou of money market funds th pay lose o nothing, sn Teesry bods Seth lel ss thon 2 erent, nog ying sens ie stock, While dt gal hs ben ‘party cel there's one mor problem with Tht very same policy mayne ep investors Tn Tresry bond for too ng, andy actly be preventing rotation nt tsk "Tey to lls ead n 1981 and hve len ought the Ist 2 yen, When bord esl bod prices re As re eam boo prices hve experienced 30 yer ball ma tet. Deftionary tens since 200 fave helped bons ta auperform stocks ver decade, With the Oye Teaury noe ye filing Blow 1.5 pezcentdving 201 Fr the Bat tine fn Miso (Ghich elo the ate of flan) the ik of hldingTeaury Bonds may exceed potenti ata ‘oar Snce bon ils ant gormah lowe, tha pat cap on how mach her on prices an {go Tresurierhre ben liable nae lve oer thea dele, which included two major stock ‘Bark ellape, Any igi inponemen nthe global economy (combined with higher il thoy the yess ace, however shel! hse bond isto start ening Mgher When bond yes Fe, bond pies sling bod prices dive nvetce nto socks, Figure 16. shows Tres Fond prs ing ding the 30 yer since 1981, while de 30earTeasry ye fl from over Leas engamensia eeesezeste?d FIGURE 16.1 30 oor Fos bd ret ay beeing8 ean ease einen, ous pono ghetto ea Coe 22 Nasdaq/bond ratio may be bottoming [FIGURE 165 Nav bra amy betting, © The Nasdaq/Bond Ratio May Be Bottoming Figure 165 pts an even nor pring ctor in Grr of tacks oer onde ptt ofthe ‘Nard Compote dex ave by the Teaury Bond pec sce 2000.The rao peaked in 2000 lvhen he elhpe he ogy doated Nowy markt tre the sole Idea or ‘Nacksand are th bod dary The Nason rato haben tring sideways ‘tweet 2007 lw ante 2007 psk, Dating, 2008, the ratio ounce frm he ame eve its 2002 low ce il) ands rz nce then, The rt eno approaching the tp ths decade Teng ang range and when the rat exceed te 207 peak, that woul be tong hat the “cule of bonds heed a ow decide for stocks may hae Begun, "EOOH pn Ca nee be su Ln 20090 Lat 0728 We 220 eh ETP FIGURE 166) Novley Compote lade las 12 yeu bigh | | | | | | | |+ sock ber mvt aa gov aia cn ua ada ng ‘The Nasdaq Composite Index Hits a 12-Year High “thecal nthe Nasgmatet ding he pring of 200 start the first bear markt ofthe new entry a ad dca or tock, (The Noa ost 78 pre of aie, )The No may no teal thestack tt out at dae Fig 16 ahs he Nowa Compote roving toe 007 igh during thet qt f 2012 och he ight even 2 ens (oe cere tetera hats eral eso atl gests that the clr rit in the owt hw nde, A seul Doormat aor long-term end ht at dete ar lng ‘Te clit er Fgre 16.6 eto the Nang vided ye SRP SOD Tht ato as eet ting since 2009 anda ai ech 12-year ih, An etre delng thse talon “xpd hat chil lenders postive si forthe et ofthe mark » Banks Show New Leadership “Another encouraging sg for de sok make comes from nw igs of trent in banking tok Tonks hoe beens hag dragon the stockmarket since 2007 The lange in bak shares daring 2008 faa ec damping fete he et ofthe stack mrt, B at my caning forthe dtr Entering 9012 bank stocks ooked aot stronger Sig adeship in Beane tock lly cca neo th ond ofan econo cotacton a the start fan ecnomicexpnson. That's why thank edeshp daring 2012 encouraging, igure 16 dows chart the Repl Banking SPDR BRE) rough the Brat quarter of 012 “The Kt raced 2010 high which an aportant chat hari (opp ne) Armove above that high would ey ong ier bnkingSaes anthe re fe stork math. Tesla pre 16TurataT the KRE diddy the SEP 500, That relative regth ne tuned pdr, the fourth quer f 011, and made bark shares ne of te marr’ tronget groups ding the fas quater of 2012. Noe: Aug banking ares lipped Back ding he seco qt they si showed makers ring 212, From the Octaber 2011 bottom tothe Fling Aug, BW Regional Banking SPDR (KRE) IKRE:SPXratio_|) 224coxcusox reponse 46 percent vers 25 percent fr the SAP 500, Financial storks, n gers ne 30 percent ding hse pid, Dain the Bet ght ont of 202, anc tpl the SP SOD margin of 7 perce © 12 parent The ena ink ETF cached ee four-year igh ims after the September 2012 ach of QE.) Homebuilders Bottom igre 16 shows Home Constructo Sars (FT) ak ithe reso ting th 010g dng (he fet quarter of 2012 Tht sks feng tock ha cn tealing teas since 2009. ove shove 2010 high wastes sor bstorer ote tha Short Phe dd ner aa of ive ye SAP 50. Tht eave engine aed elctgth arth quarter 20 ang woking bar ade homebuiderson ofthe war c's songs rope daring st que of 2012. ft hatbohgroups showed anpornent t the same tinea encouraging, bt ot ising Hanks an meade recy bg, Banks len morgage pole who wat oy diz ew home, (Nate The homebdingiex excreted the 2010 pking Jae of 012 By hat Ang had eich Nt evel ine 208 wal th top pert ET daring he st gi mths of 2012 png 52 percent vera 12 erent for the S309 The TB dou in pre within 10 mont afer is Oct 201 bottom.) Adding a New Dim “Tao esha sass on ension to Technical Analysis ne sty of mask tec trough the wt of rice charts Prior to 199, however, tena way wa Based primary on single kt sa ach ind vidual mkt wa aalyeed al by ly “iar shoo dierent miskat d' whether it was bons stocks, comma, eure. oy ch terion to wt ws goingon in ter marks [Ameren nyt die’ ere much bout hat ws goig oma orcign market ltr ntermatket “aay change hat by enouraging tole to take othe markets ine consderaian ttre Ti aes bi i " [FIGURE 168 Hom: Cortana 2010 highan! bo sow we ender Seer nie pind eto 9 Lat 90 els eonsteieaan Dow Jones U.S. Home Construction iShares (ITB)| 1 nals dosn't ple ional tech aps. sana denon to a We tl ie Analy cach het byl aed oder which ay mt Hy 40 re. oder to dba, we we rato charting meth Oe that dane, howee, it neces 4 ke eas In oder markets nto onerton Tats what ntermarket amas ls oat tec aly One eae thou the ote, The fll st sunarizs wha Deve erat deals rings to tec ara es bl martin ad apd colt whole st ries the gap betwen fandamental conomic, and eck ays, st incense the ie fechas aly by sorprating econo iflances ad opens TA 10 uch wider age w Reading Up on Charting Ahh have writen mach bout ado ating techniques in ths hook, ery per fant part ofthe tematet proces My booked Tenia Aaj ft Finn Merk (ew York Tattute of Face 1999) fers comprehensive treatment of the ere ik of tenia bse A second bok, red The ial lve Howto Spt Markt nl, Scand Eton joha Wey Sons, 2009, as ween primarily forthe ees relatively nev to hat nays and exp tow to combi interact principle ith adtocal charting Thee ae aso Taternet we tes eso to charting StockCharts.com Chart School maxon eth Stecartscon, which in 2012 war sumed “es Technical Website or the {ih eur new by Tel naj of os Commodi Magenta. com), youre Tooling fr sd te to begin our charg epic, Stoker. gos past start {GeochChorta.cn) Alf the carts shown hi hook were created on the StockChars ste A Tot of the charting caps on tha ste laa re of care StokCharscom lo aes {Chart Schoo, whch expine everything youl we Yo now soot carting (wowwstokCharts tom /stion)Thesesaboan cline bookstore th fers a current it often! books an videos that you cn explore = Neural Networks Interrarket ava egies to lok ta markets ode deere the pt ach ‘ele bavng on anabor Tat hos le to he trodction of arf inlgence sofware to search forbidden make lata: Tat approach wiles the paterson expats of roa tevvorks Neral twos at exellent ting through enormous nouns of wenn weed Torker dat, al ining repetive patterns Between atrget markt and mero tlt mar ese Neural networks cn be tend to ake market Forecasts bse op shone hen puter Aig Inert jas Softee (rpraderscom) wills he pater recon cap tates otacura eons Tht program wa develop by LouleMeebobnone of the plncersin the eld of trading sft An edation we st ran byhis son, Lane Mende, eet to dusting vests markt analy ad ang softwar in pri (wovetraerpant.com), “Tha ste also oles eduction tools and ates on internat els 28 Looking Ahead ‘e' end he book by lacking for crt tht ay oar dus aout how some emake re tionship may ply ct in ee tre igre 16:95 chat of th LS Dol rex fam 200th heft unter 2012 After pking ding 2002, the Dol ndex el sharply flrs years before Vr ring 208, wl rar toe sealing wen dt dine the pir downiret Teas teen rend sea. ine thn beeen 2008 fw ats 2009 gh The chart ses the Ciro pny tthe U.S, Dol ston, To arn the end fe dil Mgr, bowers the price wold have ose above the per tpn awn one its 2009/7010 bi The markets that wold be most flected ng dlr are commons A Dollar Bottom Would Have a Depressing Effect on Commodities igure 1610 compares the ling US. Dol nd sace 2002 with sing commas prices (he {CRU Inds) The major colle nae dll drag 2002 asthe principal reason ht commodities etween 2002 sl 208 (ce ros), The ll tom in i208 cine with roe apy apn commu pies daring th secon bal of ht yar A dor Bounce ding 2011 aso carer ste correction commodity price, Dalla ection wil play » major role nthe Fata trend comanoiy rces sda For the Ie 40 ears A 40-Year Trend of the CRB Index gure 16.11 shows the ted inthe Thomson Reaters/eferies CRB nex ine 1970. Four major tonne in the coment ee te have ten place ove hoe 40 years. Each ofthe tums was Neompanie by ta in the U.S, dll the oppose decton. The major up inthe CRD TUSD gewoon CE cen ee Ge ae ee ce ae 774 Nigh 07S Lown. hae T.8 Ong 081687) (U.S. Dollar index re oa FIGURE 163" Dslr maybe ostoningj analysis dos ple ainsi analy ae ant dinason t i, We all ae alge cach marke by el in oe to determine whlch wy Ws ot ly to ted, nde to ‘otha, we we traton carting wetbole Onc hats dove awe, necessary tke eds in other market it creation, Thats what stermarke ans ads to teat tecaical aly One cana thou he te Th lowing st sumer hs lie iterate aly bigs to teh analy st combine al matctnt a ni nd coherent wae st ridges the pp beeen fandaent eco, and tech amas ft eeeses the vlc teak na by incorporating eco nlence amd opens TA Ko ch der age » Reading Up on Charting ‘Ato hase rite much boutons charting tegen thio, ita sry por tant par ofthe itermrcet proves. 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Al the chars sn i dhs book were ected on the StoskChart te, A Tot ofthe charting capaiy on tat see vile ic of barge, Soe Chars com soles 2 ‘Chart School, wich explains everyting yon ned to hoow aout carting (wmwatoekChts com/school Theresa a online loko tt fers erent f technic Boks ed wileos that you cn explore. @ Neural Networks Iovermarket nls epires to oka lot of markets in eer to determine the imget each ome shaving on another Tha as le othe trodtion falc intlgence seize to search forbidden market relbships. Tht proach tia the pattern ecooition apes of ner! ae: Neural networks ate excelent ting dough enorous mnt of wemingt anelated market dat, sd ing repetine pater between 3 target markt and numero elated mar ‘et, Neural eos cn be tind to make market Frecatshved upon thor hen terms naptime ols Sf e-xprderscom) ales the pattern econ ap Lilies ofneralnetwors That progra wat developed by Lou Mendel, on fhe planers n the ld f tag svae, An eda web ite un by hse, Lane Mendel s deoted to “ecatg investors on marke analy, ad ring oftware pric (wwe, om) “Thatsite ako offers edetionsl token arteles om intermarkt tas 224 Looking Ahead Welle the vk hy lacking ot force tht mayer clues about how some termarket rea Tenn pla ct in theft, igre 16.9 act ofthe U.S, Dla ex rom 2000 hough thetint gute 3012. Aer paling daring 007 th Dolla Idx el sharp st yar before lent daring 208, hen trove toe he ang tenietat deine he ror downtren eo end sideways then tects 2008 ow et 2009 high The artes the ii ht Ge 5 Dol ostonsing To tum the wend ofthe lr bigher, howe, strong ‘ho price wold hve toc abve te upp rendin dey oer its 2009/2010 highs The markets Uh onl be mot feted ising dla are commodities » A Dollar Bottom Would Have a Depressing Effect on Commodities Figure 1610 compares th filing US. Dol nde sce 2002 with ing commsy pees he {CRD Ines) The major colle nthe dl dari 2007 asthe principal ron ht commits reves sharply hotwoen 200 an 2008 ee ar), The dll baton in mK 208 aiid with ‘Note tv cormotty ice during he scond If tht yar. A dle bosnce ding 2011 abso ned a downsste corrton in emmosity prices, Dell dection wil pay major role inthe fare ten of commas pies, done Fr te kat 4 years = A.40-Year Trend of the CRB Index Figure 16.1 shows the wed in th Thomson Rests fflres CRB dex since 1970, our mae turnin the commodity pce tend hare tk ple over those 40 years ach of those tras was raped by 2 tre in he U.S. dala othe oppose retin. The majo porn the CRB cogent = TS gS a ea a a HE Sane penro74 Wena |US Dollar [Index my beboa = “pen Mah 288 om 61 Clow saa cra f= jy mie Peerresuryreweeeaniresymerenrsematiitn Indo ring 1972 (iste) wa pe by lng dalla The comity pekin 1980 Bet box) cence witha major para inthe elie The je upturn commie ding 2002 end ‘Gr vice with colle nthe dll. The elapse in commodity aes doing the second alfa 2008 (econ fe) ceinced with an wptra in the dollar, Given he Matric overs Hk ‘tween thane two tks toms tetonale to same hts more stable dll going forward ‘would make tach bare fr coments to match he sins of the st dene ReutersiJefferies vere en Mah 8 a CRB Index Wt WA, FIGURE 1617 Mojorunwin Ct ldextve onled with ppt trateTAT war aT rien oth S&P 500/CRB fy, index rato fm The Stock/Commodity Ratio Favors Stocks over Commodities Figure 161? potato fthe SAPS ied the CRB nde sine 199-Thestork/commot spt phe rig 199 ad flat he ile of 208, hc mile f 2008, the rato Ferien New he nt ft st quarter of 2012, the S&P/CRB ratio seached the highs eel tery five yeas and tien abe ailing eine extending the way bck 101999 (ee ice) Tha rng rt sta the dese og rend favoring comdites i iving wo 108 new deca when acco ean alert ole Taupe ht he mere ink Hee th ck market an dlr il weaken inthe yas head, hat willbe epecsy true the ele Hk between stoeks ad commodities weakens. US Bhs tay even drive some benefit fom a Grner dol Foreign stack edersip eve the bs “reade wat rgly te el ofa weaker U.S. crency.A more te dle yarsaed woul eoere that rd and mks U.S. stock ore prefered lation fr los fonds f Trade trends, not opinions “the posing cart oheratlons ar only one pesos opinion ed om market tec exiting aio of the fet quater of 2012. | da’ aie anyone to tale on another person's pinks petal, youve kare enough i hs book to bp you to make thse dion for yore Mente eae change eetine The princes of dt analysis do'. nema rend Bo some tones clge, Bt they aly change for srenon Those changes rl tke place oer ine a aa for lng tine. The ick to pt when those change ae ocuring ant take wvntgs Tit Witham base dart cain ils combined wit he iternarkt popes deserbed in {hisbook, you doll heal the tools oul ecto help yo do shat.ABOUT THE AUTHO sono 40 yet of mak exper wl site that species fc hergF¥, CNN, FOX, andthe in sever othe meds ets, by 1992, he wa ohn J- Maxphy fra eal salt for CNBC we, Hee enor wie for StoskCharta com, a ater sand eck anal elaeion, Map bas appeared on Nigh Brine Rr, al Ben wey gen he es aan fr ntti cnttion to bal enc analy th aeration el ‘ration aT Arete, ania eit of the Markt Tce Astocaton Anal Avard In adn to wo press books on inteket aa, beak authored two eins of Tes Inet ll which ar pity Wile, He as thre Thi dale oft acl eres ‘Murphy has atachelor 0° arts eeoomce and 2 mater of urns nitrate rom Fords Univer. He alo DitectraReearch for Barwa Capital Management in. iaNew York City