Using intermarket analysis for better price perspective

By Lane Mendelsohn

Most traders tend to divide themselves into one of two camps of market analysis: Fundamental analysis based on supply/demand dynamics, weather conditions, political events, economic reports, etc. or technical analysis focused on various views of price, the one output that incorporates all of the known information from those fundamentals as reflected by the sentiment of the trading crowd at a given moment.

Although fundamentals ultimately do drive market action, many traders do not have the capability to gain an edge on this basis. Even if they did have the ability to forecast fundamentals perfectly, what is often more unpredictable is traders’ reaction to those fundamentals in producing price patterns on charts and a wide variety of technical indicators.

The problem with both forms of analysis is that traders are dealing with past facts and data – figures and prices that have already occurred and are known by the marketplace. Traders can be whizzes at analyzing the past but, unfortunately, they have to trade in the future beyond the hard right edge of a price chart.

When traders do analyze historical data collected over time, they can apply all kinds of complex studies, formulas, and indicators in an effort to forecast future price trends for a market. Usually, however, they are looking at just one market – the specific market they want to trade – to determine where the next price move will be for that market. 

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