School of Stocks

Intermarket Analysis and Sector Rotation

Module Overview

In this Module, we shall talk about Intermarket Analysis and Sector Rotation. Up until now, we have primarily talked about asset classes individually. Now is the time to combine the four primary asset classes that are traded in the market. These include currencies, commodities, bonds, and stocks. Combining the four adds a new dimension to analysis and enables one to get a more holistic picture of the overall markets. It also helps a trader to understand the business cycle better, which in turn can play an important role when it comes to understanding and deploying sector rotation strategies


1. The Four Asset Classes

10 Lessons

In this introductory chapter, we shall introduce the four asset classes that we will be talking about throughout this module. These four asset classes include currencies, commodities, bonds, and stocks. We shall conclude this chapter by highlighting the importance of Intermarket Analysis and explain why every trader/investor must pay attention to the price action and the trends of each of these asset classes.

2. Dollar and Commodities

18 Lessons

In this chapter, we shall study the correlation that exists between the dollar and commodities. From an intermarket perspective, it is important to understand the correlation between the two and to then monitor the trajectory of these two asset classes on a real time basis, given the influence they can have on the trends of other asset classes, namely bonds and stocks.

3. Commodities, Bonds, Inflation, and Interest Rates

9 Lessons

In this chapter, we will study the correlation that exists between commodities and bonds and the crucial role that inflation and interest rates play in influencing this correlation. Trends in the commodity and bond market can and do influence the trajectory of the stock market. As such, it is pivotal for one to understand the correlation between commodities and bonds at various points in time and then monitor this correlation periodically on a real time basis.

4. Bonds and Stocks

7 Lessons

In this chapter, we will explain the correlation between stocks and bonds and the role interest rates play in impacting stock prices. It is important to understand how the two correlate to each other and keep a track of how that correlation is evolving over time. Often, change in the direction of bonds can influence the direction of stocks as well

5. Commodities and Stocks

9 Lessons

In this chapter, we shall study the fourth most critical intermarket relationship, which is the one between Commodities and Stocks. When comparing the correlation between the two, we shall talk about commodities, both from a collective perspective as well as from an individual perspective.

6. Other Correlations

6 Lessons

In this chapter, we shall study the two remaining intermarket correlations, which can add a lot of value when tracked periodically while also provide clues on the overall risk appetite of market participants. The remaining two correlations that we will be covering in this chapter include the correlation between:

* Currencies and Bonds
* Currencies and Stocks

7. Summarizing the Correlations

6 Lessons

n this brief chapter, we shall re-highlight the correlations that we have studied over the course of the previous six chapters. Note that there is nothing new in this chapter, but just what we have said so far. In fact, this chapter can act as a quick reference guide or as a primer whenever someone wants to refer back to the correlations that we have discussed so far in this module.

8. Using Ratio Charts to Identify Relative Strength

7 Lessons

Having talked in detail about Intermarket Analysis over the past few chapters, it is time to move on to the second part of this module - Sector Rotation. In this chapter, we will talk about a versatile tool that can be used to identify relative strength between one instrument and another.

9. Top-Down Approach: The Technical Way

5 Lessons

In this Chapter, we will discuss how one could use the Top Down Approach using Technical and Intermarket Analysis. The objective of this approach is to scan from the top to the bottom, so as to find out the strongest markets/sectors and the strongest stocks within those markets/sectors where capital could be deployed and a portfolio of stocks could be created.

10. Top-Down Approach: Real World Application

4 Lessons

Continuing from the previous chapter, in this chapter, we shall talk about the practical application of the Top Down approach on the Indian markets/sectors and stocks, and how one could build a trading portfolio using this approach.