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Traders' Magazine
This article written by Arne and Falk Elsner was originally published in the March 2014 issue of Traders' Magazine.
- Arne and Falk Elsner have specialised in the main liquid markets and have been working for years with optimised trading systems on the short- and medium-term time levels. Professional trading and individual coaching are the two brothers’ core competencies
The principle of intermarket analysis is based on the interplay between the four major asset classes: bonds, stocks, commodities, and currencies. By reading the “language of the markets”, the intermarket model provides a suitable analytical basis for effective trading. Besides an introduction to “intermarkets”, this article offers concrete applications for trading and ways of optimising existing trading strategies. Based on the “crossover“ strategy, the possibilities offered by intermarket analysis as a logical trading filter will be presented.
I. Introduction to Intermarket Analysis
Intermarket analysis is all about the global capital flows in financial markets. The bond, stock, currency, and commodity markets are interrelated. If one of these markets is in an uptrend, this will have an impact on all the other markets. Intermarket analysis helps the trader tap into these very capital market flows. The multi-market approach presented below makes it possible for over and undervaluations to be recognised, providing insights into the expected market development. The past has shown that developments in the financial markets repeat themselves in similar market conditions. It is these fundamental interactions that intermarket analysis is based on. Those who understand the language of the markets will gain a better understanding of the future direction of capital market flows.
Combining Intermarkets with the Market and Business Cycles
The economy develops in a cyclical sequence of expansions and contractions. This constant change is called an economic or business cycle. It can be perfectly harmonised with the intermarket model. The market cycle relevant to traders precedes the business cycle since it is the future that is traded on the stock market. Figure 2 shows the idealised performance of the market cycle with the high and low points of the stock market.
The Stock Market Cycle Is a Harbinger of Highs and Lows
The market cycle can be divided into several stages during which the fundamental parameters on the financial markets change and new trend directions emerge. Important factors in this interplay include interest-rate developments, currency trends, the level of bond yields, and inflationary tendencies. They are the kind of fertile ground for whatever developments occur in the financial markets and these are reflected in the price charts. The occurrence and succession of distinctive performance highs and lows in the price charts of the bond, stock, currency, and commodity markets offer the intermarket analyst orientation and forecasting possibilities.
The information in TRADERS´ is intended for educational purposes only. It is not meant to recommend, promote or in any way imply the effectiveness of any trading system, strategy or approach. Traders are advised to do their own research and testing to determine the validity of a trading idea. Trading and investing carry a high level of risk. Past performance does not guarantee future results.
Editors’ Picks
EUR/USD hits fresh 2026 lows near 1.1570
EUR/USD adds to Monday’s heavy losses and reaches new yearly lows around 1.1570 on Tuesday. The pair’s deep pullback comes as the US Dollar extend its strong bounce, always propped up by the intense flight-to-safety environment amid the deteriorating geopolitical landscape in the Middle East.
GBP/USD attacks 1.3300, refreshing three-month lows
GBP/USD is deep in the red near 1.3300, accelerating its downside to renew three-month lows in European trading on Tuesday. The ongoing escalation in the Iran war, combined with rising Oil prices, weighs negatively on the higher-yielding Pound Sterling as the US Dollar capitalizes on increased haven demand.
Japanese Yen flat lines vs. rallying USD; bearish bias remains amid BoJ rate hike delay
The USD/JPY pair extends its sideways consolidative price move through the early European session. Spot prices remain below the highest level in over five weeks, touched the precious day, and currently trade below mid-157.00s, nearly unchanged for the day.
Editors’ Picks
EUR/USD hits fresh 2026 lows near 1.1570
EUR/USD adds to Monday’s heavy losses and reaches new yearly lows around 1.1570 on Tuesday. The pair’s deep pullback comes as the US Dollar extend its strong bounce, always propped up by the intense flight-to-safety environment amid the deteriorating geopolitical landscape in the Middle East.
Oil meets initial resistance near $78.00/bbl
Crude oil has surged to levels not seen in over a year, trading near the $78.00 mark per barrel and edging closer to a potential test of the key $80.00 threshold. The sharp advance in WTI continues to draw support from escalating geopolitical tensions in the Middle East, the effective shutdown of shipping through the Strait of Hormuz, and mounting concerns over supply disruptions.
Gold meets buyers around $5,000, remains under pressure
Gold comes under renewed and marked selling pressure on Tuesday, dangerously approaching the critical $5,000 mark per troy ounce, reversing at the same time four consecutive daily advances. The yellow metal’s bearish tone comes on the back of the increasing demand for the Greenback and investors’ repricing of Fed rate cuts.
Crypto Today: Bitcoin, Ethereum, XRP pull back as sentiment remains in extreme market fear
The cryptocurrency market is broadly in the red on Tuesday as the Middle East grapples with an escalating war. Bitcoin (BTC) is in a pullback, trading below $67,000 at the time of writing, and most altcoins follow suit.
Energy shock 2.0: Why rising Gas prices could hit the Euro Premium
Even without a confirmed, sustained disruption, the mere risk to a key global energy chokepoint is enough to inject a significant premium into European Gas markets. And for the Euro, that matters.
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