Four sectors of the financial market


The first scenario

In the aftermath of 2000 "bubble" in the stock market and the ensuing recession, followed by the U.S. economy in late 2001, began to rise. Further recovery could be accompanied by an increase in interest rates, however, the above non-market negative factors did not allow the U.S. economy to go into sustained growth. Moreover, she was on the verge of another recession.

To stimulate economic activity, the U.S. Federal Reserve was forced to reduce the discount rate. Will it be the last reduction or not, time will tell. But the next period of development of the American economy may be accompanied by a return goods-bond relationship to the classic scenario of the dynamics of these markets.

Assessing the current situation in the bond markets and commodities in terms of intermarket analysis, we can assume two scenarios for the dynamics of these markets. The first assumes that the current growth stage of inflationary pressure will continue, ie relationship between commodities and bonds will be reflected in the growth of goods and falling bond. In this case, the events in these markets will be formed as follows. After the "blurring" of military awards (primarily in the markets of oil and gold), which after the fall of the CRB Index from level 250 to 230 points is virtually complete, commodity prices will continue to rise. The reason for the growth of the CRB Index may be the level of support around 230. Increase in commodity prices should be accompanied by a fall in bond prices, so expect in such a scenario is a reversal in the bond market. At least, we can say that the further growth of bonds will be difficult (any wave of growth may be the last in this trend).

The second scenario

The second scenario involves ending inflationary pressures (ie, the end of growth of CRBobligatsii) due to falling commodity prices and a further rise in prices of bonds (or, at least, maintain the high price of the bond). The first sign of this scenario is to break down the uptrend line on the graph CRBobligatsii factor.

If the developments in the bond markets and commodities go down that scenario, the top of the chart index CRB, formed in early 2003, will meet at the base of the bond market, formed in March 2002 time lag between bond spreads and the goods will be 11 months . Such a long period lead bond market commodity market though is exceptional, has already been observed at the point when the duration was 10 months advance.

Comparing the two possible scenarios, one can say that in the first case, the effect of the above factors on the dynamics of non-market bonds and commodities expressed in the "non-classical" prolonged rise in prices of bonds amid rising commodity prices. And in the second case - a rather large period between reversals lead bond markets and goods, ie in advance of the early growth of the bonds. The principal difference between these scenarios leads to an entirely different outlook for the market dynamics. But common to both options is that the simultaneous growth of the current bonds and commodities must cease, and to determine the way in which these markets will go, additional confirmation. Therefore we need to monitor the dynamics of bonds and commodities and technical analysis to identify the figures that indicate either the continuation of trends, or the reversal. The formation of these figures and the future direction of the dynamics of the coefficient CRBobligatsii will those additional signals that will help determine how a scenario in the bond markets and products, and the development of the U.S. economy as a whole.