# Intermarket Analysis Also known as: bonds→stocks→commodities sequence, copper/gold, oil-FX. A Breadth, Sentiment & External Data concept (Macro/intermarket) in the LuxAlgo Library, with 1 indicator implementation. ## What is Intermarket Analysis? Intermarket analysis is the practice of reading the four major asset classes (currencies, bonds, stocks, and commodities) as one linked system rather than in isolation. John Murphy codified the framework: in the classic business-cycle sequence, bonds tend to turn before stocks and stocks before commodities, the dollar tends to move inversely to commodities, and ratios like copper/gold serve as growth proxies that often track bond yields. The working toolkit is simple: [ratio charts](https://www.luxalgo.com/library/concept/ratio-charts/), correlation studies, and watching which market is leading. Murphy laid the framework out in Intermarket Technical Analysis (1991), with the 1987 crash as his motivating case: a falling bond market and rising commodities preceded the October collapse in stocks. He revised the model in Intermarket Analysis (2004) after the deflationary shocks of the late 1990s broke the old bond-stock linkage. The revision is itself part of the lesson: even the author treats the relationships as tendencies to re-examine, not fixed machinery. The essential caveat is regime dependence. The stock-bond correlation was broadly positive through the inflationary decades, broadly negative through the disinflationary 2000s and 2010s, and shifted again when inflation returned. Lead-lag distances stretch and compress, so the textbook relationships are hypotheses to verify in current data, not laws. Modern practice extends the toolkit: the volatility complex through the [VIX](https://www.luxalgo.com/library/concept/vix/) and [implied volatility](https://www.luxalgo.com/library/concept/implied-volatility/), futures positioning through [open interest](https://www.luxalgo.com/library/concept/open-interest/), and breadth measures such as [advance/decline internals](https://www.luxalgo.com/library/concept/advance-decline-internals/) that check whether the index agrees with its components. Crypto joins as a further asset class: bitcoin's coupling to equities and the dollar comes and goes by regime, and [crypto cycle models](https://www.luxalgo.com/library/concept/crypto-cycle-models/) apply the same rotation logic to an asset with its own seasons. ## How to run an intermarket check on your charts The aim is a repeatable circuit of comparisons around the market you trade, not one magic overlay. 1. Chart the anchor market you trade beside its natural counterparts: for an equity index, the 10-year yield, the dollar index, credit spreads, and a commodity benchmark. 2. Express the relationships as ratios or [relative strength comparisons](https://www.luxalgo.com/library/concept/relative-strength-comparative/), stocks against bonds or copper against gold, so leadership shows as a trending line. 3. Measure rolling correlations of returns over a window matched to your horizon, recording the current sign and strength instead of assuming the textbook ones. 4. Look for divergence at the turns: an anchor market at new highs while its confirming markets stall or roll over is the classic intermarket warning. 5. Re-run the circuit on a schedule and after macro shocks; the relationships that held last quarter are what a new regime breaks first. ## How traders use it - As a context filter: before trusting an equity breakout, traders check whether yields, the dollar, and credit are telling a compatible story; conflict across markets argues for smaller size or more patience. - As a leadership watch: turns in rate-sensitive markets are monitored for early warning on equities per the classic sequence, with the understanding that lead times are irregular and sometimes absent. - As rotation input: cross-asset ratios (stocks versus bonds, copper versus gold, growth versus defensives) feed allocation decisions; sector rotation models apply the same cycle logic inside the equity market, and dollar linkages get the same treatment in FX work. - For currency work: commodity currencies are read against their exports, the oil-sensitive Canadian dollar and Norwegian krone being standard examples, with a [currency strength meter](https://www.luxalgo.com/library/concept/currency-strength-meter/) condensing which leg of a pair is moving. - As the within-market analog: breadth gauges such as the [percentage of stocks above their 200-day average](https://www.luxalgo.com/library/concept/percent-stocks-above-20-50-200-day-ma/) play the same confirming role inside an index that bonds and the dollar play across assets. ## Intermarket analysis vs related concepts - **Ratio Charts** (https://www.luxalgo.com/library/concept/ratio-charts/): The tool versus the framework. A ratio chart is how a single intermarket relationship gets drawn; intermarket analysis is the discipline of choosing which ratios matter, reading them together, and noticing when a relationship changes regime. One is an instrument, the other the argument built from it. - **Relative Strength Comparative** (https://www.luxalgo.com/library/concept/relative-strength-comparative/): Same arithmetic, different scope. RS comparative typically benchmarks a stock or sector against its index to find leaders within one market; intermarket analysis points the same comparison across asset classes to infer the macro backdrop. The chart looks identical; the question differs. - **Advance/decline Internals** (https://www.luxalgo.com/library/concept/advance-decline-internals/): Confirmation from inside versus outside. A/D internals ask whether the average stock supports the index's move; intermarket work asks whether bonds, the dollar, and commodities support the equity story. They fail independently, so the checks pair well. ## FAQ ### Are intermarket relationships stable enough to trade? No, they drift and occasionally invert. The stock-bond correlation flipped sign across inflation regimes, and dollar-commodity coupling tightens and loosens. Practitioners re-measure current correlations over rolling windows rather than assuming the textbook signs, and they treat intermarket evidence as context that adjusts conviction rather than as a standalone entry signal. ### What does the copper/gold ratio indicate? Copper is an industrial metal tied to global demand; gold is a defensive store of value. A rising ratio is read as a growth-optimism proxy, and it has often moved together with long-term bond yields. It is one macro input among many, and the linkage weakens for long stretches, so confirm against yields and equities directly. ### What is the bonds-stocks-commodities rotation sequence? The classic business-cycle ordering Murphy popularized: bonds tend to turn first as rates lead, stocks follow, and commodities turn last as real demand catches up, with the same order on the way down. It described the postwar US cycle reasonably well, but leads range from months to over a year and sometimes fail to appear, so it works as a watchlist rather than a timing device. ### Who invented intermarket analysis? John Murphy: his 1991 Intermarket Technical Analysis organized the relationships into a chart-first framework, which he revised in 2004. The ingredients are older: cycle analysts such as Martin Pring mapped how bonds, stocks, and commodities rotate through the business cycle, and Murphy's contribution was synthesis more than discovery. ### Does intermarket analysis apply to crypto? With caveats. Bitcoin has moved through stretches of near-zero correlation to equities and stretches of tight coupling, a high-beta risk asset in some regimes, its own market in others. Practitioners measure the current relationship rather than assume one, and add crypto-native gauges such as [exchange and stablecoin flows](https://www.luxalgo.com/library/concept/exchange-and-stablecoin-flows/) with no analog in the traditional classes. ### How do I measure intermarket correlations myself? Correlate returns, not prices, since price-level correlations are inflated by shared trends. Daily or weekly log returns over a rolling window (60 to 252 trading days are common) plotted as their own series make regime flips visible. And correlation is not lead-lag: a leading relationship has to be tested with shifted data, not read off a coincident number. ## Implementations in the Library - Intermarket Swing Projection (LuxAlgo): https://www.luxalgo.com/library/indicator/intermarket-swing-projection/ ## Related concepts - DXY Correlation Regimes: https://www.luxalgo.com/library/concept/dxy-correlation-regimes/ - Yield Curve: https://www.luxalgo.com/library/concept/yield-curve/ - Credit Spreads: https://www.luxalgo.com/library/concept/credit-spreads/ - Real Yields: https://www.luxalgo.com/library/concept/real-yields/ - Macro Event Playbooks: https://www.luxalgo.com/library/concept/macro-event-playbooks/ - ES Fair-value Basis: https://www.luxalgo.com/library/concept/es-fair-value-basis/ --- Source: https://www.luxalgo.com/library/concept/intermarket-analysis/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/