All language subtitles for Lesson 3 Intermarket Analysis

Welcome back folks.

This is lesson three in the January, 2017.

Content for the ICT mentorship.

We'll be discussing how to
use intermarket analysis.

Okay.

Our internet market analysis.

Presentation here.

It's going to be predominantly
conceptualized thinking.

Uh, so there's no charts here.

It's nothing exciting.

Okay.

But it's dry, useful information,
but it's very, very dry.

So I'm going to warn you ahead of time.

So if you're trying to do something apart
from 100% attention, you want to say this

lesson for a time when you can focus on
the presentation very closely and take.

Okay.

The world markets are directly linked to
one another and it's probably a common

understanding, but a lot of people don't
realize exactly how they're related,

what relationship exists, what, uh,
correlations, if, if you will exist

between certain market asset classes,
certain groups and certain sectors.

Uh, there's closely related, uh,
correlations between some unexpected

markets where without having a global
or macro understanding of what they

do as a country, in terms of exports,
you wouldn't understand what the

relationships would be without having
that information or that study behind.

So understanding them as a collective
whole or how these markets relate with

one another will aid in your analysis.

And now since the January content is
predominantly focused on 100% long-term

analysis, our focus needs to be on the
relationships of these four groups.

The four major groups of inner
market analysis are as follows

the bond and interest rate market.

The commodity markets, the stock
market and the currency's market.

All four of these groups together
are closely related with one another.

Now they don't move lock
step to one another.

There's not a five
points higher for bonds.

Therefore it's going to be five points
in another asset class or group.

That's going to move in
relationship to that movement.

It doesn't work like.

Since we're looking at long-term
macro perspectives and analysis

concepts, there's going to be a certain
measure of lead and lag time for

some of these market relationships.

And for some of you, that's going
to turn you off right away, because

you're used to knowing this is what
it's supposed to do, and therefore

I'm going to expect it right now.

And when you're being a longterm,
Trader or using long-term analysis.

There's going to be a certain measure of
lead time and lag time before you actually

see the marketplace reflect what would
be expected in terms of their analysis.

But the benefit of this is, and this
is what I have gravitated towards.

Uh, you can use an economist theory, which
is instead of going through fundamental

data, looking at things like CPI or
employment trends or all these fundamental

data points that are released throughout
the month, every single month, that's just

too much information for me to digest.

And I don't ever claim to have the
mental capacity to understand it all.

In fact, uh, I've said many times
in all of my teachings that I

don't believe that there is a.

Realistic way of staying abreast
of all those types of things.

If you're waiting through all
that data, I mean, either you

have to be a serious data nut for.

It to me, it's over, everyone's
head you just honest.

Don't think it can be done.

Uh, I'd love to meet someone that
could do it fundamentally improve

beyond the shadow of doubt that
they can use that fundamental

data to forecast future prices.

Okay.

That would be wonderful.

If I could find that that would be
something I would probably add to my

repertoire, but in my studies, I've
never been able to really ascertain

any one, to be able to use that
information and be able to forecast

with a great deal of accuracy.

If you will.

Now, even on a long-term basis,
uh, because the markets are

slow to come to fruition.

These, these market moves take a long
time to develop and unfold in our charts.

It takes a great deal of patience.

And while there's a lot of information
to Wade through, if you go through

a fundamentally and using all those
data points and data, To me, if

we just focus on these four major
groups, it'll give us all the insights

that, that data will ultimately
give, give you a fundamentalist.

So what I mean by that, we're
going to actually break down

some of the relationships as
we go through this mentorship.

But in this teaching here, I want to give
you kind of like an overview and some of

the things that I have picked up along
the way as a trader that I like to focus

on when I'm looking at market relations.

Tries to enter market analysis overview
and the four major groups for the inner

market analysis, the bond market and
interest rate market bonds and stocks.

Generally, they move to.

Okay.

So if we're seeing a bond market rally
and it's the bond prices, not the yield.

Okay.

So if we're looking at the treasury
bond market and the bond prices

are rallying higher in an uptrend,
generally, that's going to be helpful and

supportive of a bull market for stocks.

Conversely, if you see the bond, the bond
market in a bear market, and it's been

trending lower, it's gonna be very hard
for stocks to rally in that environment.

Now that doesn't mean that it can't.

Okay.

It just means that that underlying
trend of the bond market moving

lower is going to have a effect and
weight on that stock market rally.

And eventually you're going to have
to pay the Piper in that stock.

Market's going to have to correct
and get back in alignment with the

overall trend of the bottom line.

Commodities are a market group that
moves opposite to the bond prices.

So if we see bonds moving higher,
uh, commodities will be moving

lower in relationship to that move.

And.

Our third group stock market stocks that
moved together with bonds, as we said,

uh, that you have to constantly refer
to the market indices for stocks and

the bond market, or if you're a stock
trader, you can use the information

that's gleaned from the bond market.

Uh, preferably if you're going to
be a stock market trader, you want

to be looking at the bond market
as a indicator that you have.

Underlying strengthened the bond market.

So if bond prices are going higher in
your buyer stocks, then you can go in

with a great deal of confidence that
you have the fundamentals behind you,

that lower interest rates with the
bond prices, rallying stocks like that.

If bonds are trading lower stocks,
don't like higher interest rates

and that's what's going to happen.

If you see bond prices dropping,
that means the interest rate yields

are actually increasing bonds,
do not like a high interest rate.

And currencies obviously are
influenced by commodities.

So the effects of export sales
and production in relationship to

certain commodities, that's going
to have a direct impact on specific

commodities and specific currencies.

Okay.

Well, look at their first relationship
here as the us dollar versus c'mon.

Okay, we're gonna look at this as
a inversely related relationship.

In other words, they move
opposite to each other.

That means if the dollar index is moving
one direction to the commodity and as

a group, as a whole commodities will
be moving in the opposite direction.

So for example, specifically
us dollar index.

If it's trading higher commodities
as a whole should be trending lower.

And if the dollar index is
trending lower or trading.

Commodities, we'll be doing
the opposite and going higher.

Now when we're looking
at commodities, okay.

Grains in agriculturals
are very export sensitive.

So if we have a strong dollar, that's
going to diminish the desire or demand

for exports in the form of grains
and livestock, agricultural markets.

In other words, grains and meat.

And if the us dollar index shows weakness
that instills an increase or demand

for grain in agricultural exports,

us dollar index, if it's going
higher or rallying, this is also

seen with stocks and bonds moving
up because it's supportive of the

stock and bond market calling.

Us dollar index.

If it moves lower, this is seen
with support with stocks and

bonds, both trending lower as well.

Us dollar index.

If it's moving higher, this has going
to be seen with commodity currencies,

moving lower in dollar index.

If it's moving down, it's going to see
a commodity currency, rally or movement.

And the way you measure this, as you
could look at the U S dollar index

versus the CRB index, which is commodity
research bureau index, you can get that

information on the internet@crbtrader.com.

I'll give you some notes in the PDF file.

That would include more information
on all the things that you'll

hear about in this presentation.

Okay.

The next one is the bonds
versus the commodity.

And bonds and commodities have
an inverse relationship as well.

That means they, again, move
opposite to one another.

Now, if the bond prices or the treasury
bond market, okay, moves up or trades

higher, that generally is going to have
a impact on commodities moving lower.

And if bonds are trending or
trading lower, that's going

to allow commodities to rally.

Now, when we're looking at the
relationship between bonds or treasury

bonds, 30 year treasury note, And the
commodity market, what we're really

focusing on is inflationary impact.

So if we're following along and looking
for signs of inflation, it's going

to be noticed in the markets that are
commodities, commodities are the leading

indication for inflationary investment.

So what's the lead and lag time in a
change or long-term basis for the bond

and commodity relationships, because
we're dealing with a long-term macro

perspective on these two assets.

They can sometimes take six to 12
months before you see a change in

trend on the relationship between
the bonds and the commodities.

Now that means that commodities may turn.

And bonds may eventually turn lower as
a result later on, or bonds may turn up

and commodities may turn lower later on
as a result of that, it doesn't happen.

Lock step for step.

It doesn't give you that immediate
feedback because it's long-term macro

fundamentals are behind these big moves.

And especially when we're dealing
with these two asset classes,

there's a relationship basis.

So it takes a long time sometimes for
the effects of interest rates changes.

Supply and demand factors that are
really weighed in the consumption

or production of commodities as a
whole now treasury bonds or T-bones

versus the CRB index is what you'd
be using to measure the relationship

between the two, but the CRB index.

Let me add this to your notes.

It's very heavily weighted with
the agricultural and grain markets.

So when we look at CRB index,
it's very, very heavy on.

Soybean prices, wheat prices, corn
prices, cattle prices, cog prices.

Okay, so you have to keep that in mind.

When you're looking at CRB index, you want
to use the Goldman Sachs commodity index.

When you're looking for the energy
focused side of the marketplace.

In other words, it's heavily
weighted on energy and you want

to weigh that against the bonds.

And the Goldman Sachs
industrial metal index.

And this is, um, four
focused on global trends.

And it's not meant for metals like
silver palladium, platinum gold.

Okay.

These metals are like zinc, tin, copper.

Uh, aluminum, uh, they're
they're industrial metals.

So they're heavily sensitive to global
trends and big sensitive 10 tendencies

in the marketplace around the world.

Where if there's a big demand
for industrial metals, then

you'll see it in this index.

If there's not, there's also going
to be evidence of that in this index.

And in summary bond yields, when
they're going higher, that would be

seen with the bond market going lower,
or the bond price is going lower.

That means bond yields are increasing
and that's going to push commodities up.

And my bond yields are going down.

That means the treasury bond
market prices are going higher.

That's going to push commodities down.

Okay, we're gonna look at the
bonds versus the stock market.

Now this has a positive correlation.

That means they move
in the same direction.

And obviously that means when the
bond market is trending higher or

trading higher, that's going to provide
strength for stocks and support for it.

Name of the bond markets
trending or moving lower.

This will have an effect
that's bearish on stocks.

And the bond market or the treasury bond
or 30 year benchmark acts as a leading

indicator for stock direction, deleted,
lag time in changes for longterm trends.

Again can be six to 12 months in duration.

That means what you see going on
in the long-term trends of the bond

market may take a little bit of time
up to, yes, I say a year before you

see these long-term trends start to
manifest themselves in the stock market.

Now there's one caveat with this.

Okay.

When there's deflationary periods, that
means when prices are decreasing and this

is a rarity, it doesn't happen a lot.

Uh, we actually saw this, um, in the
latter part of 1998, uh, it was, it was

indicated in the, in the markets that
there was potentially that happening.

Um, but when this occurs, the
bonds perform very well because

you're actually seeing the
interest rate markets collapsing.

But with bonds going up, that's usually
seen in a, in a deflationary period,

you're usually seeing bonds going
higher, the bond prices or treasury

bonds price going higher with stocks
going lower end commodity is going down.

Like I say, it's a rarity that ever
happens, but usually we're not ever

really going to see a deflationary period.

I can imagine anytime soon.

Okay.

Finally, we're going to look at
some key intermarket relationships.

Okay.

When you're bullish dollar index,
you're going to be expecting

bearishness on gold bullishness on gold.

You're going to be expecting
Aussie New Zealand to be

bullish because of their nature.

As a gold Xsporter when oil was
bullish, you're going to be bearish

on us CAD, uh, because of the Canadian
export leadership and, uh, oil export.

Dao when it's up or bullish that's
Nikkei index is bullish as well.

Is it direct relationship
to the down Nikkei?

And when Nika index is down, uh,
that's going to be bearish for the

us dollar versus Japanese yen pair.

And generally when yields are down or
bearish, that's going to be bearish for

the currency because the money seeks.

And when gold is bearish, that's usually
bullish for us dollar versus CAD.

And finally, uh, by having an
understanding of all of these

relationships as a whole conceptually,
uh, they give you confirmation

of long-term analysis, the
relationships between all of them.

If you're seeing a number of these
things in alignment with your long-term

analysis, you probably on two.

The right path.

You're, you're knowing what you're looking
at the right direction in the marketplace.

Rarely will you see a wide disparity
with all these things not aligning.

And if you have a good sample
size of some of these things in

alignment, generally your long-term
analysis is probably going to be.

True to form.

It will probably pan out
in the long-term direction.

Like you think it will.

The problem is timing.

Uh, long-term trend trading or
long-term analysis and timing are

just in my opinion, some of the
hardest things to time, because it's

hard to get traders, to focus on
allowing a little bit more movement

against their underlying entry point.

Uh, what I mean by that is because you're
trading on higher timeframe charts.

Um, Probably because of your, your
home life, your, um, time constraints

that keep you from being able to
trade with a lower timeframe entry.

So you're forced many times to trade
off of the daily chart and you're going

to execute off of the daily chart.

You're going to have to permit yourself
a great deal of movement against you in

terms of a stop-loss, uh, because of the
ranges are a lot larger, uh, and you're

gonna have to require a lot more time.

Even with that said, if you're going
to be using these points of information

and in relationships with intermarket
analysis, it's going to help you

in any, in all facets of trading.

Regardless if you're day trading,
scalping, short-term trading, swing

trading, or position trading and
longterm scope, it's beneficial

to know these things and it helps
build probabilities in your favor.

And again, nothing in here.

Uh, equates to 100% of shorty, uh, you
know, that there's absolutely no guarantee

that nothing out there can't change on
a drop of a hat, which you think you

see in the charts could always be wrong.

Cause there's always a human element.

That's always involved here.

The, the analyst is you, but I think if
you were to spend some time going over

the relationships that's going through.

This presentation.

If you spend that time, look at it on
a macro level, you'll see that there's

a great deal of value in knowing these
relationships and because they are leading

you to a long-term trend, following a
directional bias, using higher timeframe

daily charts, it will give you confidence.

At a trader to know that you're trading
with the underlying fundamentals and

you don't really require all of that
time and energy and, and diligence

needed to go through fundamental data.

The relationships between these markets,
as we outlined in this presentation

will take you to the same outcome
that fundamental data will give you.

It's just like the relationships
here will sometimes lie.

That same lagging effect that
happens in the fundamental data.

I knew this much about fundamental
data, just because the fundamentals

suggest something should be bullish.

Doesn't mean tomorrow.

It's going to go straight up.

Okay.

There's going to be time that has
to be built in for that market to

start building in a bullish tendency,
and then it'll start to move

higher, but long-term macro trends.

Okay.

And you can see when they're starting
and shifting and moving into place

by using the information that
we shared in this presentation.

So again, study it, believe me,
when I tell you the information in

this is worth its weight in gold.

It's not something that is sexy.

It's not a lot of charts where I can
show you Judas swings and patterns

and all this and that, but it's real
information that has a direct relationship

to how the markets work as a whole.

How they tie together and it keeps you
out of having to look at fundamental data.

And if there's anything else that,
you know, you can't associate with in

terms of value, that's enough, there's
so many things out there that you

would be wasting my opinion, your time
you're going through all that data.

And when you can just simply see what
price is telling you because of price

and all these asset classes together,
as a, as a whole will reflect what

the fundamentals are actually doing.

Trained accredited staff at these
big institutions, banks, producers,

manufacturers, and exporters.

They're using the real fundamental data.

They have people that are trained
accredited, and they're able to use that

information to forecast trends in sales
and consumption all those types of things.

And they make their business plans
around those, those data points.

I can't keep abreast of all that stuff.

There's too many things that's
going on in my own personal life.

Let alone.

You know, to keep up with all of the
ever-changing things in the marketplace.

So if I can look at the price of these
asset classes and the relationship between

the off of all four of them in concert
with one another, I will just like, you

will come to the conclusion of what the
geopolitical macro trend and dare I say it

fundamental perspective is on the market
as a macro perspective trader until next

time wish good luck and good trading.