Intermarket Analysis

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, correlation studies, and watching which market is leading.

The essential caveat is that these relationships are regime-dependent, not fixed. The stock-bond correlation, for example, was broadly positive through the inflationary decades, broadly negative through the disinflationary 2000s and 2010s, and shifted again when inflation returned. Murphy himself revised the model after the deflationary shocks of the late 1990s. Lead-lag distances stretch and compress, so the textbook relationships are hypotheses to verify in current data, not laws.

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; the sector rotation model applies the same cycle logic inside the equity market, and dollar linkages get their own treatment in DXY correlation regimes.