Intermarket relationships became far more complicated in 2014. Let’s consider some of the major economic events that occurred:
- Oil’s precipitous drop in price to below $60 a barrel
- The European Central Bank’s announcement of negative interest rates
- The Federal Reserve moving away from quantitative-easing
- New all-time highs in the US equity markets
All of these events, as well as a confluence of other global factors, have drastically altered existing market relationships. This requires a paradigm shift for intermarket analysis where market trends are no longer viewed in isolation.
Analyzing Markets – U.S Dollar
Take the relationship of the U.S. dollar (USD) to equities and metals. A little over a year ago, those following this relationship were quite certain that there was an inverse correlation. Well, until that was turned on its head of late, and they began to trade in tandem. As we now have seen, the relationship between the equities, metals and USD have gone through a seeming transformation, leaving many stunned and scratching their heads in disbelief.
The takeaway is that markets and individual equities now have to be examined in the context of the evolving global economy. Many traders now understand that the evolution of technology has led to a highly connected global market; the problem is that most mass-marketed trading software programs are still using outdated technical analysis which ignores these important intermarket relationships. This method of analyzing market trends in isolation will result in misinformed trades and thus a loss of profit.
VantagePoint Trading Software is the exception. This software analyzes markets using a neural network process to identify which markets have the most influence on a target market, then produces a set of intermarket data to generate predictive indicators for short-term price trend forecasts for the new market realities. This data gives traders an edge on the market that can’t otherwise be obtained.