LOS H requires us to:
describe intermarket analysis as it relates to technical analysis and asset allocation
a. Intermarket analysis is a field within the technical analysis that combines analysis of major categories of securities—namely, equities, bonds, currencies, and commodities—to identify market trends and possible inflections in a trend.
b. The Intermarket analysis also looks at industry subsectors, such as the nine sectors the S&P 500 is divided into, and the relationships among the major stock markets of countries with the largest economies, such as New York, London, and Tokyo stock exchanges.
c. In the intermarket analysis, technicians often look for inflection points in one market as a warning sign to start looking for a change in trend in a related market.
d. To identify these intermarket relationships, a commonly used tool is relative strength analysis, which charts the price of one security divided by the price of another.