Dollar and Commodities
While the Dollar and currency markets are part of intermarket analysis, the Dollar is a bit of a wild card. So far as stocks are concerned, a Dollar is not bearish unless accompanied by a severe progress in commodity prices. Obviously, a big advance in commodities could be bearish for bonds. By extension, a Dollar is also generally bearish for bonds. A Dollar behaves an economic stimulation. Multinational stocks which derive a large part of their revenue are benefited by this.
What are the ramifiions of a rising Dollar? A nations currency is a reflection of its economy and federal balance sheet. Nations with balance sheets and economies have more powerful currencies. Countries with debt burdens and economies are subject to weaker currencies. A rising Dollar puts downward pressure on commodity prices since most commodities are priced in Dollars, such as oil. Bonds benefit from a decrease in commodity prices since this reduces inflationary pressures. Stocks may benefit from a decrease in commodity prices since this reduces the prices for raw materials.
Industrial Metals and Bonds
Not many commodities are made equal. In particular, oil is more likely to supply consequences. Unrest in oil producing nations or areas generally causes oil prices to spike. A price rise is unfavorable for stocks, but a price rise due to increasing demand can be favorable for stocks. This is also true for compounds, which are less vulnerable to those supply shocks. Consequently, chartists can observe industrial metals prices to get clues on the economy and the stock market. Growing prices reflect demand and a healthy economy. Falling prices reflect demand and a weak economy.
Industrial stocks and bonds rise for different reasons. Metals proceed when the economy is when inflationary pressures are building. When the economy is weak and/or deflationary pressures are 17, bonds decrease under these circumstances and rise. Further insights can be provided by A percentage of the two into economic strength/weakness or inflation/deflation. The proportion of metal prices to bond prices increases when economic strength and inflation are widespread. This ratio will decrease when the economic exhaustion and deflation are dominant.