Concept of Intermarket Analysis

Intuitively, investors and traders know that many markets are interrelated. They realize that a development that affects one market is likely to have repercussions in other markets. No market is isolated in today's global financial system. However, technical analysis has traditionally emphasized single-market analysis, focusing on one chart at a time and failing to keep up with structural changes that have occurred in financial markets as the global economy has emerged with advances in telecommunications and increasing internationalization of business and commerce.

Many individual traders or investors still rely upon the same types of mass-marketed, single-market analysis tools and information sources that have been around since the early 1970s. There is a large percentage of traders/investors who continue to end up losing their capital. If you are still doing what the masses are doing with their analysis, isn’t it likely that you will have the average-below average returns the mass experiences, or possibly even end up losing all your hard-earned money?

In the currency, stock, and bond markets especially, you cannot ignore the broader intermarket context affecting the market that you are investing in, or trading. You need to technically analyze the behavior of each individual market to see the double tops or broken trendlines or indicator crossovers that so many other traders are following, because that is part of the mass psychology that drives price action. However, it is increasingly important that you factor into your analysis the external intermarket forces that influence each market being traded.