Intermarket Analysis
Also: Inter-Market Analysis, Four Major Market Groups
Intermarket analysis is the study of directional relationships between the four major global asset class groups — bonds/interest rates, commodities, stocks, and currencies — to derive a macro directional bias without relying on individual fundamental data points (CPI, employment, etc.). The four groups are linked with known correlations: bonds and stocks move together (positive); bonds and commodities move inversely (negative); the Dollar Index and commodities move inversely (negative); the Dollar Index and stocks move together (positive). These relationships have lead and lag times of up to 6–12 months at the macro level, so the feedback is not immediate. Monitoring the price action of all four groups in concert reveals the same directional conclusions that fundamental data analysis would yield, but without requiring analysis of dozens of individual data releases.
Identification7
- Bonds (Treasury price) rising = supportive of stocks rallying; bonds falling = headwind for stocks
- Dollar Index rising = commodities as a group declining; Dollar declining = commodities rallying (CRB Index as proxy)
- Dollar Index rising = commodity-linked currencies (AUD, NZD, CAD) declining
- Bonds rising = commodities declining; bonds declining = commodities rallying (inflationary signal)
- Nikkei bullish = USD/JPY bullish; Nikkei bearish = USD/JPY bearish
- Gold bearish = USD/CAD bullish; gold bullish = AUD and NZD bullish (gold export relationship)
- Oil bullish = USD/CAD bearish (Canadian oil export relationship)
Invalidation2
- Deflationary periods (rare): bonds rise but stocks AND commodities fall simultaneously — decouples the normal bond-stock positive relationship
- Short-term market dislocations may temporarily break correlations; lead-lag up to 12 months means short-term divergence is normal
Inferred Conditions (Unvalidated)
- The CRB Index (heavily weighted to grains/agricultural) measures the USD vs commodity relationship; Goldman Sachs Commodity Index is the energy-weighted alternative
- The Goldman Sachs Industrial Metal Index measures global demand for industrial metals (zinc, tin, copper, aluminium)
- Bond market (30-year Treasury bond) acts as a leading indicator for stock market direction with 6–12 month lead-lag
- When multiple intermarket relationships align with a trade bias, the probability of the bias being correct increases substantially
- Strong dollar reduces demand for US agricultural exports (grains, livestock); weak dollar increases export demand
ICT Quotes
"The four major groups of intermarket analysis are as follows. The bond and interest rate markets, the commodity markets, the stock market, and the currencies market. All four of these groups together are closely related with one another."
"If we just focus on these four major groups, it'll give us all the insights that that data will ultimately give you as a fundamentalist."
"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 when bond yields are going down, that means the treasury bond market prices are going higher, that's going to push commodities down."
"By having an understanding of all these relationships as a whole, conceptually, 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're probably on to the right path."
Timeframes
Version History1 version
47-ICT Mentorship Core Content - Month 5 - How To Use Intermarket Analysis.srt
"World markets are directly linked to one another... There's closely related correlations between some unexpected markets where, without having a global macro understanding of what they do, as a countr…"
Initial definition from January 2017 mentorship lesson 3
Notes
ICT presents intermarket analysis as an alternative to traditional fundamental data analysis (CPI, employment, etc.), arguing that price action in the four groups encodes the same information without requiring the analyst to process dozens of individual data releases. Key reference: Treasury bonds (30-year, not 10-year note) vs CRB Index for bond-commodity relationship. Deflationary caveat noted from 1998 as a historical rarity. The relationships described apply to longer-term (weekly/monthly) analysis frames; short-term dislocations are normal within the lead-lag window.