Intermarket Study

beginner_av · #31 4th June 2007, 01:16 AM

Quote:

Originally Posted by kkseal

Not factoring any 3rd (or other) variable/s can produce spurious results.

Like take Sunil's observation on Metal & Auto Indices. Common sense dictates that a rise in metal (steel particularly although aluminium is also used for engines & other components) prices would result in metal index moving up & auto index moving down i.e. an inverse relation; but there's a 3rd factor - the interest rate scenario.

So there was a time when steel prices were moving up but the Auto index wasn't doing too badly as the interest rates were down. This was followed by a phase when steel prices moved down while interest rates hadn't firmed up yet; this was the best phase for Auto stocks. Next int rates started moving up but steel was still depressed (or just about stabilized) and Autos continued to do well (though the momentum decreased). Now we have a situation when interest rates have mounted and metals also rising - the worst scenario for Autos.

From the above it seems that the correlation between Auto & Int rates is stronger than that between Auto & Metals. In any case you cannot get a clear picture without factoring in all three.

Another variable would be oil prices - but the impact of this would be less in a controlled pricing regime like in India (where oil comps bear most of the brunt), while in say the US this might be the biggest factor influencing Auto sales.

Regards,
Kalyan.

exactly what i expected. i was going to post the same thing, but thought that u or oxy will do it anyway! infact i had attached a higher probability to oxy. more on this later

uasish · #32 4th June 2007, 02:51 AM

Why we do not arrange a live paper competition ,participated by all senior members ,each one allocated same amount of capital & mkt NSE Fut.With 2 trades max.
Any day with 2 hrs pre mkt notice,let us see who all are theorist & actual practitioner.A healthy competition,no ill feeling.Log our trades with entry price & SL. Seen many so called Biggies since last 7 yrs landed as Epitah on tombstones.

uasish · #33 4th June 2007, 03:06 AM

Let us make it more stringent stock of anybody's choice,& only 1 type of order either buy or sell ,many of us talk here ,why dont we demostrate to new comers.

beginner_av · #34 4th June 2007, 08:26 PM

Quote:

Originally Posted by CreditViolet

PS - I didnt get time to answer on ur FDI PM, I need to reply in a bit detail since I think the whole cycle determination thing is barking up the wrong tree.

sure CV, will wait for your reply.

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