Traders' Contributors
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 remains offered below 1.1600, seems vulnerable near multi-month low
The EUR/USD pair struggles to capitalize on the overnight bounce from the 1.1530 region, or the lowest level since November 2025, and lower for the third consecutive day on Wednesday. Spot prices slide back below the 1.1600 mark during the Asian session and seem vulnerable to slide further.
GBP/USD slips below key averages as geopolitical risks mount
GBP/USD fell about 0.35% on Tuesday, settling around 1.3350 after slipping below the 200-day Exponential Moving Average for the first time since early December. The pair has pulled back sharply from its late-January high near 1.3870, shedding over 500 pips in a series of lower highs and lower lows.
USD/JPY retraces to near 157.50 amid Japanese intervention fears
USD/JPY pulls back to near 157.50 in the Asian session on Wednesday as bulls turn cautious amid Japanese FX intervention fears following the recent rally to a nearly six-week high, reached Tuesday. Meanwhile, reduced bets for an immediate BoJ rate hike undermine the Japanese Yen, while the flight to safety benefits the US Dollar's status as a global reserve currency amid expectations for a less dovish Fed, keeping the downside limited for the pair.
Editors’ Picks
AUD/USD stays deep in red near 0.7000 after Aussie GDP, China PMIs
AUD/USD struggles to capitalize on the previous day's bounce from an over three-week trough and remains heavy near 0.7000 in the Asian session on Wednesday. The pair shrugged off upbeat Q4 Australian GDP print and mixed Chinese PMI data. Rising Middle East geopolitical tensions continue to weigh on investors' sentiment, benefiting the US Dollar's safe-haven status at the expense of the higher-yielding Australian Dollar.
USD/JPY retraces to near 157.50 amid Japanese intervention fears
USD/JPY pulls back to near 157.50 in the Asian session on Wednesday as bulls turn cautious amid Japanese FX intervention fears following the recent rally to a nearly six-week high, reached Tuesday. Meanwhile, reduced bets for an immediate BoJ rate hike undermine the Japanese Yen, while the flight to safety benefits the US Dollar's status as a global reserve currency amid expectations for a less dovish Fed, keeping the downside limited for the pair.
Gold rebounds ahead of US ADP, will it last?
Gold finds renewed Asian bids and retests $5,230 early Wednesday after the heavy sell-off on Tuesday. The US Dollar stands tall amid escalating Middle East tensions and reduced dovish Fed expectations. Gold defends $5,000 or 50% Fibo level after facing rejection at the 78.6% Fibo resistance at $5,342 amid bullish RSI.
Bitcoin, Ethereum and Ripple struggle for direction as consolidation persists
Bitcoin, Ethereum and Ripple prices trade with a cautious tone at the time of writing on Wednesday as upside momentum continues to fade across the broader crypto market. BTC remains within a parallel channel, ETH struggles below key resistance, while XRP remains fragile within a descending channel. These top three cryptocurrencies by market capitalization continue to struggle to establish a directional bias amid the consolidation phase.
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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