Articles

As of this writing (March 17, 2008), the status of interest rates sends some important messages to the stock market investors. This article aims at reading and decoding these messages. Debt Securities and the Stock Market In his book, "Intermarket Technical Analysis" (see [2]), John Murphy stresses the positive relation between the bond market and the stock market: "The bond market usually leads the stock market". This relation is not limited to long term bonds but it also extends to debt securities of all maturities (T-Bills and T-Notes). There are three main reasons this relation exists and all of them are based on the fact that the debt securities prices move in the opposite direction of the interest rates: 1. When interest rates...

Recently, I had the opportunity to teach a session of OTA XLT Forex. In the class, we were identifying potential trades that were to play out in the next few days to weeks. One of the comments that I made in the class resulted in a flood of emails being sent to me from the students. I was discussing inter-market analysis and mentioned that bonds and stocks tend to move together in the same direction. This came as a shock to most of the students who believed that the bonds and stocks should move in the opposite direction. In studying to become a Chartered Market Technician, I was required to study the relationships between asset classes, and as a trader, this has benefited me greatly. By understanding these relationships, a trader can...