predicting trends intermkt analysis

8/2/2019 Predicting Trends Intermkt Analysis

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Predicting TrendsPredicting TrendswithwithIntermarketIntermarket

AnalysisAnalysis1


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DisclaimerDisclaimer

It should not be assumed that the methods, techniques, or indicators presented in this book and seminar will beprofitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in

this book and seminar are for educational purposes only. This is not a solicitation of any order to buy or sell.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS.

UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL

TRADING. ALSO, SINCE THE TRADES IN THIS BOOK and SEMINAR HAVE NOT ACTUALLY BEEN

EXECUTED, THE RESULTS WE STATE MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT,

IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING

PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE

BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS

LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.

The authors and publisher assume no responsibilities for actions taken by readers. The authors and publisher are not

providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any

suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. Allreaders and seminar attendees assume all risk, including but not limited to the risk of trading losses.

Day Trading can result in large losses and may not be an activity suitable for everyone.

Copyright 1994-2007 by Pristine Capital Holdings, Inc. All rights reserved. Printed in the United States of America.

Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or

distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of

the publisher.

2


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Table of ContentsTable of Contents

Bond Analysis

Concluding Thoughts

Definition and generalizations

Price-yield analysis

Yield Curve

Measuring inflation

Currencies & Commodities

IntroductionWhy focus on inter-related markets

Pertinent inter-market groups

What worries the market?

Definitions and componentsGeneral relationships and why study

U.S Dollar Principles

Charting inter-relationships

Sector Analysis

Developing A Trading Bias

Stock and sector relationships

Stock and commodity relationshipsStock and yield relationships

Bullish or bearish alignment of

commodity and yield movements

US Dollar and implications for the

economy

When commodities and interest

rates flag danger for the stock market

3


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IntroductionIntroduction

4


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Why Focus on Inter-Related Markets?

6

The relationships between commodities, currencies, stocks and bond

yields give important clues about their direction. Markets are inter-related.

It gives the markets insights about the economy, inflation or lack thereof.

It gives us clues how one market or stock sector may move based on

movements in other markets. Money flows between markets.

To understand from the markets point of view the collective thoughts that

are occurring in the financial markets.


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7

A better understanding of inter-market relationships gives traders

the knowledge and confidence to trade within those markets.

You do not need to become an economist!

Your goal is to be objective self-directed investor or traderthat gains insights from inter-market relationships .


Why Focus on Inter-Related Markets?


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8The primary factor to price stability is inflation.

Currencies -A falling currency makes foreign goods more

expensive, which has the effect of increasing inflation.

CommoditiesRising or falling commodity prices increase or

decrease the cost of goods, which has a direct influence on inflation.

Stocks Rise or fall based on expectations of future earnings

growth and inflation.

Bonds The evaluation of all commodities, currencies and stocks

indicates expectations for the economy & inflation.

InterInter--Market GroupsMarket Groups


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All point to increasing inflation!

Rising Gold prices Traditionally a leading indicator of inflation.

Rising Oil prices Acts as a tax on the economy that is paid at the pumps.

Businesses paying higher oil prices will attempt to pass those costs to consumers.

Rising Interest rates Makes it more expensive to borrow and run businesses,

which is bearish for the economy and stocks.

Rising Commodity prices Higher commodity prices (metals, agricultural

products, and energy) mean higher costs of goods.

Falling Dollar Decreases the buying power of each dollar making imports

more expensive.

Rising interest rates, rising commodities, and a falling Dollar together are bearish.

What Worries The Market?What Worries The Market?

9


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Strong Dollar in Canada is

Squeezing Its Economy

Drubbing of the Dollar:

Dangerous or Therapeutic?

Bond Investors Face

Rate Threat (Again)

Fed Notes Disclose Worries That

Inflation May Pick UP

Gold is Flashing Warnings

You Could Strike Gold in Metals, Mining,

Even Steel - - If You Act Quickly

Global Demand for Nickel, Copper, Gold

and Other Metals is Strengthening

Actual Story Headings From The Media

After this DVD, you will be able to formulate intelligent opinions from news

clips like these about the inter-market relationships and tradable opportunities!


10


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CurrenciesCurrencies

andand

CommoditiesCommodities11


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Currencies and CommoditiesCurrencies and Commodities

12

The U.S. Dollar is the most

traded currency in the world asthe main reserve currency.

Like all currencies, its actual

value can change significantly.

We will look at what affects

movement in the U.S. Dollar

to determine its effect in other

markets and currencies.

A countrys currency is its official unit of monetary exchange for goods, services and securities.


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1395 97 98 99 00 01 02 03 04

180

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95 97 98 99 00 01 02 03 04

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95 97 98 99 00 01 02 03 04

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400

95 97 98 99 00 01 02 03 04

100

150

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450

500

95 97 98 99 00 01 02 03 04

160

170180190200210220

230240250260270280290300310

Energy

Meats Metals

Grains

Gold SilverCopper

Aluminum

Platinum

Corn

WheatSoybeans

Crude Oil

Heating Oil

Natural Gas

HogsCattle

Pork Bellies

Others:

Cocoa

Sugar

CottonOrange Juice

Lumber

Commodities are tradedbetween countries in exchange

for their currencies.

We will look at the effectmovement in commodities have

on currencies and inflation.

Commodity Research Bureau(CRB) is the most widely

followed commodity index.

CRB



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14

Currencies and commodities have a direct correlation with each other because

currency is exchanged for commodities, and vice versa.

A business buying commodities from another country may sell their currency (supply)

and buy another countries currency (demand) to pay for that commodity.

Currencies of the countries that are large producers of commodities (Canada and

Australia) typically move more with changing demand for those commodities.

The demand for a countries currency also makes it a commodity to be traded based onsupply and demand for it. Forex



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16

Strong Dollar Disadvantages

U.S. products become more expensive in foreign

markets.

U.S. firms must compete with lower priced

foreign goods.

It is more expensive for foreigners to visit U.S.

It is more expensive for foreign investors and

countries to buy U.S. securities and real estate.

Weak Dollar Advantages

U.S. products become less expensive in foreign

markets.U.S. firms find less competitive pressure to

lower prices, but can lower prices and still profit.

It is less expensive for foreign tourists to visit

the U.S.It is cheaper for foreign investors and countries

to purchase U.S. securities and real estate.

Weak Dollar Disadvantages

U.S. consumers see higher prices on foreign

products/services.Higher prices on foreign products contribute

to higher inflation in the U.S.

It is more expensive for U.S. consumers to

travel to and buy goods in foreign countries.Its more expensive for U.S. Dollars to

purchase foreign stocks, bonds and commodities.

Strong / Weak Dollar EffectsStrong / Weak Dollar Effects

Strong Dollar Advantages

U.S. consumers see lower prices on foreign

products/services.

Lower prices on foreign products/services

help keep inflation lower` in the U.S.

It is less expensive for U.S. consumers to

travel to and buy goods in foreign countries.

U.S. dollars can purchase foreign stocks,

bonds and commodities at lower prices.


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1786 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

180

190

200

210

220

230

240

250

260

270

280

290

80

85

90

95

100

105

110

115

120

125 Rising commodities

are considered bearish

for the U.S. Dollar.

Falling commodities

are considered bullish

for the U.S. Dollar.

There are times when

this correlation diverges

greatly.

There is a key to when

this correlation is closer,

which we will get to.

U.S. Dollar

CRB IndexCommodities were

becoming more expensive

The Dollars buyingpower was increasing

US Dollar and CommoditiesUS Dollar and Commodities


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18

Rising commodity prices and a falling U.S. Dollar are inflationary. Why?

Higher costs and lower buying power.

Falling commodity prices and a rising U.S. Dollar are deflationary. Why?

Lower costs and higher buying power.

The question is, if there is inflation or deflation based on rising or falling costs for

goods and services, to what extent is it? Is it really a problem and how can we tell?

The Bond Market will tell us about expectations for inflation, or lack thereof, and

the effectiveness of the Feds action to keep it in check. Well get to this soon.

Gold is also an indicator of inflation expectations, and acts as a gauge of the

Feds action of raising or lowering rates. Lets look at this!



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CRB and GoldCRB and Gold

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

180190200210220230240250

260270280290300310320330340

CRB Index

Gold

The CRB Index moves up as

demand for commodities increases

and/or supply decreases.

Gold has a very close

correlation with commodities.

As commodity prices rise, sodo expectations of inflation.

With this simple correlation, wecan create trading ideas.

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US DollarUS Dollar -- CRB and GoldCRB and Gold

85 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

180190

200

210

220

230

240250

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300

350

400

450

500

80

85

90

95

100

105

110

115

120

125

80

85

90

95

100

105

110

115

120

125

Gold- CRB

US Dollar

The U.S. $ has an inverse correlationwith the CRB and Gold, but there are

times when they diverge significantly.

The reason for this divergence will be

clear when we review their inter-market

relationship with interests rates.

BearishCRB-Gold=

BullishU.S.Dollar

Bullis

hCRB

-Gold

=

BearishU.S.

Doll

ar

20


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21

General U.S. Dollar Principles The Dollar is falling vs.the other currencies.

The bond market may

have inflation fears.

Commodities and gold

may have been rising.

We know theres more

supply than demand.

There is a mountain of

news and economic

indicators that affect the

U.S $ relative to others.

We are not going tofocus on this!



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Currencies and Commodity Rich CountriesCurrencies and Commodity Rich Countries

22

Demand for commodities results in demand for currencies of countries that produce them.

Countries needing commodities from those countries will buy the currencies of those countries

to purchase those commodities.Example: Sell U.S. Dollars - Buy Australian Dollars.

By monitoring the CRB Index, the trend and changes of commodities can be assessed.

2002 2003 2004 2

180

190

200

210

220

230

240

250

260

270

280

290

0.65

0.70

0.75

0.80

0.85

2001 2002 2003 2004 20

0.75

0.80

0.85

0.90

0.95

0.50

0.55

0.60

0.65

0.70

0.75

0.80

CRB Index Japanese Yen

Australian DollarCanadian Dollar

Japan is not a sellerof commodities, sothe Yen was risingfor other reasons


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Foreign Currencies and US BondsForeign Currencies and US Bonds

23

1 2002 2003 2004

105

110

115

120

8590

95

100

105

110

115

120125

10-Yr. U.S. Note

10-Yr. Note priced in EUROS

The EURO was appreciating

significantly against the U.S.$,

which resulted in losses for

EURO investors in U.S. Bonds

1 2002 2003 2004 2

105

110

115

120

115

120

125

130

135

140

145

10-Yr. U.S. Note

10-Yr. Note priced in YEN

Foreign governments and business taking Dollars for goods and services can use those dollars tobuy U.S. Bonds.

Although foreign investors can buy U.S securities cheaper when their currency is appreciating

against the U.S. Dollar, they can lose overall when the U.S Dollar continues to depreciate.

Japanese investors buying U.S. Bonds faired much better than European investors over the period

shown because the EURO appreciated in value more than the YEN against the U.S. Dollar.


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Foreign Currencies and US StocksForeign Currencies and US Stocks

24

5 1996 1997 1998 1999 2000 2001 2002 2003 2004

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

1995 1997 1998 1999 2000 2001 2002 2003 2004

500

600

700

800

9001000

1100

1200

1300

1400

1500

1600

3

4

5

6

7

8

9

10U.S. Dollar vs.British Pound

S&P 500

S&P 500 inBritish Pound

U.S.$ Stronger

than BP

U.S.$ weaker

than BP

S&P and U.S.$

strong at thesame time

S&P and U.S.$ weak

at the same time

S&P strong,

U.S.$ weak

It will cost more for a foreign investor to invest in the S&P 500 when the U.S Dollar is

appreciating against that currency, and less when the U.S Dollar is depreciating against it.

Once they have invested, their return will follow the S&P 500 as long as the direction of U.S.

Dollar performance against that currency and the S&P 500 continues to move in the same direction.

When the S&P 500 moved up and the U.S. Dollar remained weak against the Pound, a British

investor did not enjoy the returns that a U.S. investor did.


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Currencies and Equity Markets

91 93 94 95 96 97 98 99 00 01 02 03 0491 93 94 95 96 97 98 99 00 01 02 03 04

U.S. Dollar Gold

91 92 93 94 95 96 97 98 99 00 01 02 03 04

S&P 500

S S

H

A Falling U.S. $ is bullish for Gold

(inflation).

Gold reflects the markets view on

inflation and often trends opposite stocks.

The H&S top in the U.S. $ and

historically low interest rates (not shown)

were indications to keep an eye on Gold. 25


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Currencies Affects InflationCurrencies Affects Inflation

26

c 2004 Mar Apr May Jun Jul Aug Sep Oct Nov Dec

100

105

110

115

120125

130

135

140

145

150

80

85

90

95

100

105

110

115

120

2004 Mar Apr May Jun Jul Aug Sep Oct Nov Dec

100

105

110

115

120

125

130

135

140

145

150

120

130

140

150

160

170

180

Copper Copper

Copper priced in EUROSCopper priced in U.S. $

A falling currency is inflationary. To fully understand why this is the case, the above charts

are copper, priced in U.S. Dollars and EUROS. The U.S. Dollar was falling against the EURO.

A U.S. firm would have to pay more with its Dollars than a European firm paying in EUROS.

The higher costs are added to products bought by consumers, which raises the cost of living.

C i d C d Oil


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Currencies and Crude OilCurrencies and Crude Oil

27

9 2000 2001 2002 2003 2004 2

15

20

25

30

35

40

45

50

55

15

20

25

30

35

40

45

9 2000 2001 2002 2003 2004 2

15

20

25

30

35

40

45

50

55

1520

25

30

35

40

45

50

55

60

65

Crude Oil Crude Oil

Crude priced in EUROSCrude priced in U.S. $

Crude Oil is priced in U.S. Dollars, but there has been some sales in EUROS.

The chart to the left shows Crude priced in U.S. $. The left is in EUROS.

If the U.S. had to pay for Oil in EUROS, its cost would increase dramaticallyovernight, since it would have to exchange U.S. $ for EUROS.

F i C i d U S R l EF i C i d U S R l E


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Foreign Currencies and U.S. Real EstateForeign Currencies and U.S. Real Estate

You are selling your home for

$500,000. Since you live in New

York, you expect to be paid in

U.S. Dollars.

Vacationers from London

decide they like it and decide to

buy at your asking price.

The exchange rate for U.S. $

from British Pounds is $1.92

The cost for your home to the

vacationers in British Pounds is

260,417 U.S. Dollars!

1997 1998 1999 2000 2001 2002 2003 2004

300

400

500

600

700

800

80

85

90

95

100

105

110

115

120

135

140

145150

155

160

165

170

175

180

185

190195British Pound

U.S. Dollar

Real Estate Index

Interest rates play a major role in the

direction of the real estate market, but

upward acceleration can be seen on the indexafter the Dollars fall accelerated downward

28

C i d C di iC i d C diti


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Foreigners buy U.S. Dollar-based assets

with those U.S. Dollars. U.S. Stocks,

Bonds, Real Estate and Foreign Oil.

They can also sell them in exchange fortheir own or other currencies. Forex

U.S. companies needing to buy raw

commodities may sell U.S. $ and buy

foreign currency to pay for them.

U.S. consumers send

U.S. Dollars overseas for

goods and services.

U.S. $ Commodities EU, JY, CD, AU

When the demand for commodities is

high, their prices rise and the U.S. $ falls.

29


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BONDSBONDS

30

B d B iBond Basics


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A bond is a debt to pay back a loan over a specified period of time,

at a specified rate of interest.

The longer the period of time to pay back the debt, the higher the

expected return by investors (e.g., 3-Month versus 30-Year).

U.S. government bonds are considered risk-free compared to

corporate debt.

The higher the perceived risk of default, the higher the expected

return by investors (e.g., Government bond versus corporate debt).

Bond BasicsBond Basics

31



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32uary March April May June July August September November Decemb4.554.604.654.704.75

4.804.854.904.955.005.055.105.155.205.25

5.305.355.405.455.505.555.605.65

102103

104

105

106

107

108

109110

111

112

113

114

115

116117

Bond Yields

Bond Prices

Bond Prices and Yields moveinverse to each other.As prices move

down, yields move up and vice versa.

Bond Price-Yield Basics




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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Short-term rates are controlled

by the Federal Reserve, and short-

term bond yields follow.

Long-term rates are controlled by the market. Whileinfluenced by the Feds actions on short-term rates,

longer-term expectations for inflation are what moves it.

Long-Term Rate

Short-Term Rate

33




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34mber 2004 February March April May June July

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

3-Month

6-Month

1-Year

2-Year

3-Year

5-Year

10-Year

15-Year

30-YearNormal Yield AlignmentVarious maturities

generally trend together.

Their trends can give

us clues to the future

direction of stocks, since

they reflect the bond

markets view on

commodities, currencies,

and the economy.


ShortShort Term Bond GuidelinesTerm Bond Guidelines


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35

Short-term interest rates (yields) follow the Federal Reserves

adjustments to the Fed Funds Rate.

Short-term rates rising, tighten the supply of money, eventually

slowing the economy. This also tends to support the U.S. $ byraising its yield in relation to other currencies. Forex

Short-term rates falling, loosen the supply of money, eventually

stimulating the economy. This also tends to weaken the U.S. $ by

lowering its yield in relation to other currencies. Forex

ShortShort--Term Bond GuidelinesTerm Bond Guidelines

LongLong Term Bond GuidelinesTerm Bond Guidelines


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36

LongLong--Term Bond GuidelinesTerm Bond Guidelines

Long-term interest rates (yields) fall on expectations of a

weakening economy and/or lower inflation expectations.

Long-term interest rates (yields) rise on expectations of a

strengthening economy and/or higher inflation expectations.

The long-term bond markets interpretation of the economy,

inflation, short-terms rates, commodities and currencies is

what moves this market.

LongLong-Term ViewTerm View Short Term ViewShort Term View


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LongLong--Term ViewTerm View Short Term ViewShort Term View

989 1990 1991 1992 1993 1994 1995

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

8 1999 2000 2001 2002 2003 2004 2

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Rising long- and short- term yields indicates inflation fears and Fed tightening.

Falling long- and short-term yields indicates low inflation fears and Fed easing.

Falling or rising may not be bullish or bearish, but the two views should not meet.

Risin

glo

ng-te

rm3-Month Yields30-Year Yields

Risin

gsh

ort-term

Fallinglong-term

Falli

ngshort-term

Flat to stable long-term

Rising

sh

ort-te

rm

F

allingsh

ort-term

Markets View Feds View

37

Borrowing and InvestingBorrowing and Investing


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Borrowing and InvestingBorrowing and Investing

3881 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

0

5

10

15

20

4

5

6

7

8

9

10

11

12

13

14

15

When long-term

yields are high, it

makes borrowing

expensive.

When short-

term yields are

high, it attracts

money to low risk

investments.

Would you want toborrow money here?

Would you like to

invest risk free here?

What about here?

What about here?

30-Yr.

Fed Funds Rate

A

B

D

C

Bond Market GuidelinesBond Market Guidelines


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39

While rising interest rates are viewed as bearish for

stocks, rising rates after a period of declining rates indicates

a strengthening economy, which is positive.

While falling interest rates are viewed as bullish for

stocks, falling rates after a period of advancing rates

indicates a weakening economy, which is negative.

The spread (difference) between bonds of long and

short durations will be key to determining whether the

amount of tightening is bullish or bearish for stocks.

Bond Market GuidelinesBond Market Guidelines

DonDont Fight the Fed?t Fight the Fed?


40/81

DonDon t Fight the Fed?t Fight the Fed?

401998 1999 2000 2001 2002 2003 2004 2

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

800

900

1000

1100

1200

1300

1400

1500

Fed Funds Rate

3-Month Yields (most

closely follow the Fed

Funds Rates and at

times lead it)

Fed began cutting rates once

bubble popped, but it was not

the time to be buying stocks.

Bear market endsS&P 500

Fed raises rates per macro-economic data, which the

market absorbed.

The old adage Dont

fight the Fed is not true

at major turning points.

After 2000, the Feds

repeated reduction in

rates was too little, too

late.

The rising rates in

2004 were not bearish

because of the steady

prior decline.

WhatWhats the Spread?s the Spread?


41/81

WhatWhat s the Spread?s the Spread?

411958 1959 1960 1961

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

3-Month Yields

30-Year Yields

Spread

Wide

Spread Narrowing

Yields Inverted

Spread Widening

The spread and/or inversion between short-

and long-term rates are a key guide to recessionsand potential stock market corrections.

A wide spread is bullish, inversion is bearish.

30-Yr. above 3-Month isan normal Yield

relationship

30-Yr. below 3-Month,abnormal yield relationship

Bond Market Anticipates the FedBond Market Anticipates the Fed


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Bond Market Anticipates the FedBond Market Anticipates the Fed

42

Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 Feb Mar

4.0

4.5

5.0

5.5

6.0

6.5

7.0

4.5

5.0

5.5

6.0

6.5

7.0

Dec 2004 Feb Mar Apr May J un Jul Aug Sep Oct Nov Dec 20

1.5

2.0

2.5

3.0

0.91.01.11.2

1.31.41.51.61.71.81.92.02.12.22.3

Fed FundsFed Funds

2-Year Note 2-Year Note

The Bond Market anticipates the Feds actions and gives us a heads up.

In 2000, the yield on the 2-Year Note was falling for several months (A) prior to the

Fed cutting the Fed Funds Rate.

In 2004, the yield on the 2-Year Note was rising for over two months (B) before the

Fed raised the Fed Funds Rate (C).

AB

C

Economic ReportsEconomic Reports


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Economic Reportsco o c epo ts

43

Beige Book

Leading Economic

Indicators

Economic reports that

monitor the economy and

inflation are issued weekly.

Many try to predict their

movements and what they

are indicating about the

economy, inflation and theFeds Policy based on them.

We are only concerned

with how the Bond Market

reacts to these numbers,

not the number themselves.

Business Inventories

Durable Goods Orders

Factory Orders

Gross Domestic Product

Industrial Production and

Capacity Utilization Consumer Confidence Index

Employment Report

Initial Jobless ClaimsPersonal Income and

Consumption

Real Earnings

Redbook Retail Averages

Retail Sales

Construction Spending

Existing Home Sales

Housing Market Index

Housing StartsNew Home Sales

Leading Economic

Indicators

Consumer Price Index

Employment Cost Index

Producer Price Index

Productivity and Unit Labor

Costs

Purchasing Managers Index

Industrial Production

Fed Indicators Housing

Inflation

Consumer Confidenceand Employment

What is Inflation and How is it Measured?What is Inflation and How is it Measured?


44/81

920 1930 1940 1950 1960 1970 1980 1990 2000

-10

-5

0

5

10

15

20CPI Annual

Rate of Change

There is so much attention paid to inflation, but does it

actually correlate to positive or negative stock prices?

What is Inflation and How is it Measured?What is Inflation and How is it Measured?

An increase in the amount of money or credit available (more dollars) in relation to theamount of goods or services available (low supply), which causes an increase in the general

cost of goods and services.

One measure of inflation is the percentage increase in the Consumer Price Index (CPI).

CPI represents changes in prices of all goods and services purchased for consumption by

urban households, and is viewed by plotting its annual rate of change.

44

There Must be More to CPI!There Must be More to CPI!


45/81

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

100

150

200

250

300

350

400

S&P 500

CPI Annual Rate of Change When the CPIs annual Rate of

Change was rising (bearish) and

falling (bullish), it did not have the

effect it should have where marked.

25% Correction

Flat

The market has done very well andvery poorly with CPI rising and

falling, so there must be something

else to this, which we will get to!

45

Bond Market StudiesBond Market Studies


46/81

In 1996, the New York Federal Reserve did a study on what indicators were the most

reliable predictors of a recession. Stocks react before economists will confirm a recession.

The only one of six indicators that was significantly reliable was anInverted Yield Curve.

They later did a private study with over 20 factors in 1999 and still found that the only

dependable indicator was theInverted Yield Curve.

The two studies done by the Fed indicated an Inverted Yield Curve to be the only reliable

indication of a recession, whichdoes havea negative effect on stocks for obvious reasons.

For this reason, we will read the bond markets reaction to changes in currenciesand commodities and trends for indications of a changing environment for stocks. 46

To What Extent Have Yields Inverted?To What Extent Have Yields Inverted?


47/81

November 2000 FebruaryMarch April May June July August September Novemb

4.955.005.05

5.105.15

5.205.25

5.30

5.355.40

5.455.50

5.555.60

5.65

5.705.75

5.805.85

5.905.95

6.00

6.056.10

6.156.20

6.256.30

6.35

6.406.45

6.506.55

6.606.65

6.70

6.756.80

6.856.90

6.95

3-Month

5-Year

10-Year

30-Year

A:Late 1999 yields are inproper alignment.

B: The 10- and 30-Year

moved under the 5-Year,

which inverted them:

Early warning of

economic weakness!

C: The 30-Year and 3-

Month inverted:

Early warning of recession

(and bear market per

technicals)!

D: Complete inversion:

Macro supported

aggressive bearish posture.

A B C D

Complete inversion

To What Extent Have Yields Inverted?To What Extent Have Yields Inverted?


48/81

Recession concerns (A), but

inversion is not complete!

Recession concernsabate (B). 3-Month moves

back under the 30-Year.A

B

48

Composite of LongComposite of Long-- and Shortand Short--TermTerm


49/81

49

1958 1959 1960

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

0.51.01.52.02.53.03.54.04.5

1958 1959 1960

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

40

45

50

55

60

30-Yr. Minus 3-Month 30-Yr. Minus 3-Month

S&P 50030-Yr.

3-Month.

Making a composite indicator by subtracting the 30-Yr. yield from the 3-Month

yield will form a signal line that is clearer.

Once the spread narrows to .5, it signals the yield curve is nearing an abnormallevel and an early warning. Once under 0, the yields have become inverted.

Composite of LongComposite of Long-- and Shortand Short--TermTerm


50/81

50

2 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

500

1000

1500

Spreads greater than 3 points are very bullish, but do not

suggest a market advance initially. It takes time for abullish monetary yield spread to take effect.

Yield Spread

S&P 500

CPI and Yield SpreadCPI and Yield Spread


51/81

511998 1999 2000 2001 2002 2003 2004 20

-0.50.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1.0

1.5

2.0

2.5

3.0

3.5

800

900

1000

1100

1200

1300

1400

1500

1600

At (A), inflation wasrising, but there was no ill

effect until yields inverted.

At (B), not until thespread reached 3.0 points

and inflation actually

turned up did the stock

market move up.

At (C), the CPI Annual

Rate of Change nearedupper levels that

coincided with the 2000

high in the S&P 500, but

the spread between yieldswas very bullish.

S&P 500

CPI Annual Rate of Change

Yield Spread

(A)

(A)

(B)

(C)

(B)

(C)

Tradable Instruments in Bonds and Currencies


52/81

52

Bond Futures Bond/Yield Trusts

iShares

SHY Lehman 1-3 Year

Treasury Bond Fund

TLT - Lehman 20+ Year

Treasury Bond FundIEF - Lehman 7-10 Year

Treasury Bond Fund

AGG - Lehman Aggregate

Bond Fund

30 Year Bonds Futures (ZB)

10-Year Note Futures (ZN)

5-Year Note Futures (ZF)

2-Year Note Futures (ZT)

6J Yen

6E - Euro

6C Canadian

6A Australia

6B British Pound

Currencies


53/81

Sector AnalysisSector Analysis

53

Introductory ThoughtsIntroductory Thoughts


54/81

54

The relationships between bonds, currencies, commodities

and stocks will direct our attention to tradable sectors.

The relationships between various sectors and related

stocks may move together or opposite each other, those

relationships will offer clues to their direction.

These intra-market relationships will direct you to where

funds are flowing, and to tradable opportunities.



55/81

55

3 30 6

2003

13 21 27 3 10

February

18 24 3 10

March

17 24 31 7

April

14 21 28 5

May

12

1250

1300

1350

1400

1450

1500

1550

250

260

270

280

290

300310

320

330

340

350

360

370

380390

400

It is bullish for thebroader markets to be led by

the tech-heavy Nasdaq.

Semiconductors represent

a large percent of the

Nasdaq, so they often lead it,

as they did in early March.

Rallies in the Nasdaq

without the relative strength

of the semis are suspect.

Semiconductor Index (SOX)

NASDAQ

Higher Low



56/81

56

NASDAQ

SOX Index The SOX making a lower

low in early Sept. (A) was a

concern for the Nasdaq;

however, the SOX rallied .

In Dec., the lower high(B) and relative weakness in

the SOX made the bullish

run in the Nasdaq suspect.

These two cannot stay

out of sync for long!9August

16 23 30 7 13

September

20 27 4 11

October

18 25 1 8

November

15 22 29 6 13

December

20 27 3 1

2005

1750

1800

1850

1900

1950

2000

2050

2100

2150

2200

350

360

370

380

390

400

410

420

430

440

450

460

NASDAQ

SOX Index

A

B



57/81

571997 1998 1999 2000 2001 2002 2003 2004 2

At times, a commodity

and/or the underlying equities

index will not confirm a new

high or low of the other.

Anon-confirmationmakes

the index or the commoditys

new high or low suspect.

Confirmed new highs and

lows suggest continuation of

the commodity and the

underlying equity index.

Non-confirmation

Gold/Silver Index (XAU)

Gold

Non-confirmation

Confirmed

Confirmed

Confirmed

Confirmed

Non-confirmation

Non-confirmation



58/81

58A M J J A S O N D 2004 M A M J J A S O N

25

30

35

40

45

50

55

80

85

90

95

100

105

110115

120

125

130

400

450

500

550

600

650

700

750

Oil Index

Oil Services Index

Crude Oil

The early steady rise incrude was confirmed by

the Oil Index and the Oil

Services Index.

In late 2004, the new

highs in the Oil and Oil

Services Index was notconfirmed by Crude Oil.

Anon-confirmationof

Crude suggests either

Crude will move higher or

the breakout in the Indices

will fail.

Commodity and Underlying

Non-confirmation

Non-confirmation

Non-confirmation

Confirmed

Confirmed

Confirmed



59/81

59

95 96 97 98 99 00 01 02 03 04

10

15

20

25

30

35

40

45

50

55

95 96 97 98 99 00 01 02 03 04

203040

5060708090

100110120130140

150160170180190200210220

1995 1997 1998 1999 2001 2002 2003 2004

250

300

350

400

450

500

550

600

650

700

750

1997 1998 1999 2000 2001 2002 2003 2004

40

50

60

70

80

90

100

110

120

130

140

150

Crude Oil

AMEX Oil IndexAirline Index

Oil Services Index The rising priceof oil is bullish for

oil related stocks.

High oil prices

are bearish for

industries whosetop expenses are

oil related.

Airlines and

Truckers.

Transport Index



60/81

60

26 2 9

August

16 23 30 7 13 20

September

27 4 11

October

18 25 1 8 15

November

22 29 6

Dec

3.903.95

4.00

4.05

4.10

4.15

4.20

4.25

4.30

4.35

4.40

4.45

4.50

4.55

4.60

4.65

350

355

360

365

370

375

380385

390

395

400

405

410

415

420

425430

435

Homebuilders Index Rising interest ratesare bearish for home

builders.

At (A), the steady

drop in yields

confirmed the movehigher in the sector.

At (B), the higher

low and breakout in

yields confirmed the

Double Top and breaklower in the sector.

Rising yields is

bearish for interest

rate sensitive stocks.A

BHigher Low10-YearYields



61/81

611998 1999 2000 2001 2002 2003 2004

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

1998 1999 2000 2001 2002 2003 2004

5

10

15

20

25

30

35

40

45

50

55

60

1998 1999 2000 2001 2002 2003 2004

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Lennar Homes

S&P 500

10-Yr. NoteLower yields, bullishfor home builders

A weak U.S.$ also attracts

foreign money to U.S. real estate

In sync

Home builders will be influenced by the

general market, but also by bond yields.

They can show relative strength orweakness depending on whether all

markets are in sync or not.

Lower yields and a higher stockmarket are bullish for home builders.



62/81

While home building stocks

will be influenced by general

market trends, interests rates will

have a major influence.

At (A) the sharp fall in the 10-

Yr. Yield increases the bullish

bias in Hovnanian.

At (B), the sharp rise raised a

more bearish bias.

At (C) the sharp rise was

bearish and HOV declined.

At (D) rates were lower, then

stable at a historical low level.A S O N D 2003 A M J J A S O N D 2004 A M J J A S O N D 210

15

20

25

30

35

40

45

50

3.0

3.5

4.0

4.5

(A)

(A)(B)

(B)

(C)

(C)

(D)

(D)

?

?

10-Yr. Yield

Hovnanian

(HOV)

62

Tradable Instruments When Commodities Are Trendin


63/81

63

Futures and Trusts

Steel (X, AKS, SCHN, STLD)

Mining Gold (NEM, AEM, ABX, PDG, GFI, MDG, AU)Mining Other (PD, AL, FCX, AA)

Paper (IP, WY, GP, BOW, TIN, BCC, LPX)

Fertilizer (POT, AGU)

Chemicals (DOW, APD, LYO, HPC, DD, ASH)

Construction Materials (VMC, EXP, CX, TXI)

Oil & Gas (AHC, BR, MRO, KMG, OXY)

Energy Equipment & Services (BHI, SLB, CAM, WFT)

Containers and packaging (SEE, SSCC, PKG)

Grains (ADM, CAG, MGPI)

Futures on CRB Index and

Goldman Sachs Commodity Index

Holders/SPDRS/iShares

XLB Materials SPDR

XLE Energy SPDR

GLD Gold SPDR

OIH Oil Services

Commodities themselves

YG Gold

Many other metals, meats,

grains, etc. at www.cbot.com

Stocks - Industry



64/81

642000 2001 2002 2003 2004

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

2000 2001 2002 2003 2004

175180185190195200205210215220225

230235240245250255260265270275280285290295300

2000 2001 2002 2003 2004

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

Basic Materials (XLB)

S&P 500

CRB Index

Basic material and commodity-related

stocks will be influenced by the general

market and by the CRB.

They can show relative strength or

weakness depending on whether all

markets are in sync or not.

Rising CRB and a higher stockmarket is bullish for basic materials.

In sync

Relative Strength

103


F il d


65/81

65

7 13 20

ptember

27 4 11

October

18 25 1 8 15

November

22 29 6 13

December

20 27 3 1

2005

270

275

280

285

290

7 13 20

eptember

27 4 11

October

18 25 1 8 15

November

22 29 6 13

December

20 27 3 1

2005

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

34.5

35.0

7 13 20

eptember

27 4 11

October

18 25 1 8 15

November

22 29 6 13

December

20 27 3 1

2005

79

808182838485

868788

8990

919293949596

979899

100

101102

103

CRB Index

Alcan

7 13 20

eptember

27 4 11

October

18 25 1 8 15

November

22 29 6 13

December

20 27 3 1

2005

51.552.0

52.5

53.0

53.5

54.0

54.5

55.0

55.5

56.056.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

60.5

Phelps Dodge

Ashland

When the CRB is weak, look to short bearish patterns related to commodity stocks

Aluminum Chemicals

Copper

A

Failed

Breakout

Weakest

B



66/81

66August September October November December 200

80

85

90

95

100

105

110

80

81

82

83

8485

86

87

88

89

90

1.31.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

2.3

3-Month Yields

U.S. Dollar

GOLD Index

Short-term yields wererising steady, which should

have a positive effect on the

US Dollar and negative

effect on Gold.

At (A), there was a minor

move up in the Dollar

which, along with the rising

yields, was enough to affect

Gold.

The next move up in the

Dollar (B) brought the next

drop in the Gold Index.

(B)(A)

This was an area of long-term support

D Th



67/81

67ar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 Mar

22002300

24002500260027002800290030003100

3200330034003500360037003800

10000

10500

11000

11500

Dow Theory Dow Theory states that to have atrue bull market, the Dow Industrials

and Transports must move up together.

Industrial companies manufacturethe goods; the Transports move them.

Thus, the theory is that if they are

doing poorly, it is an indicator of

economic weakness (and vice versa).

The Dow Transports were giving a

bearish signal in 1999 and early 2000.

As the Dow rallied to a new high in

2000, the Transports failed to move up

at all, which was a bearish divergence.

DOW-30

Transports

Non-confirmation/

Bearish Divergence

D Th



68/81

68t Nov Dec 2004 Mar Apr May Jun Jul Aug Sep Oct

27002750

28002850290029503000305031003150

3200325033003350340034503500

9500

9600

9700

9800

990010000

10100

10200

10300

10400

10500

1060010700

10800

The Dow Transports weregiving bullish signals in 2004

as they advanced to new highs.

Dow Theory would haveflagged a bearish warning

because of the Dows failure to

make new highs; however, the

message of the Transports was

still bullish, giving us a bias to

buy compelling long setups.

Transportation stocks move

goods, so if they are doing

well, it is an excellent indicator

of economic strength.

DOW-30

The strength in Transports made

us more bullish at these points,particularly with bullish Sentiment

Dow Theory

Transports



69/81

69M A M J J A S O N D 2003 M A M J J A S O N

Relative Strength at Early Expansion

Retail jumping from theweakest to the strongest

showed strong consumer

confidence and spending.

Transports, Green

Retail, Red

Russell 600 Small Cap, Black

S&P, Purple

Strength in retailers is abullish indicator for the market

Investments in small capsshows investor confidence.

Strong transports are a good

sign for the economy, since it is

needed to move produced goods

For example, FDX.

All support a bullish

bias for the S&P 500


70/81

InterInter--MarketMarket

Review andReview and

Developing aDeveloping aTrade BiasTrade Bias 70

InterInter--Market Review and BiasMarket Review and Bias

I iti ll i i t t b d Th i di t th t th i d i ll


71/81

71

Initially, raising rates are not bad. They indicate that the economy is doing well.

Equity markets can rise while short-term rates are rising.

If long-term rates are going up with short-term rates, it is eventually bearish.

Long and short rates coming together is not bad until they get too close or invert.

Rising commodity prices and rising long- and short-term interest rates areeventually bearish for stocks, and vice versa.

Rising commodity prices are bearish for the U.S. Dollar, and vice versa.

The direction of the U.S. Dollar has implications for the economy, which affects

the stock market, but its direction alone is not enough to be bullish or bearish.

Its the bond markets opinion, combined with the above that will guide us.

InterInter--Market Review and BiaMarket Review and Bias

Commodities and Interest: Flag


72/81

72

By early 1973, the 3-MonthYield moved above the 5- and

30-Year. Combined with rising

commodities, a bearish signal.

The bear market ended in

late 1974 when yields revertedinto a normal alignment.

Larger market corrections

have occurred when

commodity prices and interest

rates both advanced, and/or

became inverted.

CRB

S&P 500

3-Month, Red

5-Year, Purple

30-Year, Green

Commodities and Interest: Flag

2x Bottom

Breakdown

Inversion

1972 1973 1974 1975 1

100

150

200

60

70

80

90

100

110

120

4

5

6

7

8

9

10Danger and Opportunity!

CRB

5- & 30-

Inverted

3-Month, Red

5-Year, Purple

30-Year, Green

S&P 500


In 2002 the historically wide5 & 30 Yr reverted to normal


73/81

2001 2002 2003 2004 2

180190

200210220230240250260270

280290

800

900

10001100

1200

1300

1400

1500

1

2

3

4

56

In2002,the historically wide

spread between long- and short-

term yields provided the

monetary liquidity to support a

bullish bias for stocks.

Commodities started rising in2002 (demand), indicating the

economy was improving.

Sideways to declining long-

term yields at (A) suggested there

was low expectations of inflationeven though the CRB was rising.

CRB

S&P 500

30-Year, Green

5-Year, Purple

3-Month, Red

5- & 30-Yr. reverted to normal

A

A

73

U.S. $ Bias Based on CRB and YieldsU.S. $ Bias Based on CRB and Yields

125


74/81

7486 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

1

2

3

4

5

6

7

8

9

180

190

200

210

220

230

240

250

260

270

280

290

80

85

90

95

100

105

110

115120

125At (A)commodities were

rising (bearish), rates were

declining, then flat (bearish).

Dollar down.

At (B)commodities were

declining (bullish),rates falling(bearish).Dollar neutral.

At (C)commodities were

rising (bearish),rates were

rising (bullish).Dollar neutral.

At (D)commodities were

falling most of the time

(bullish), rates were steady at

higher levels, then higher

(bullish). Dollar up.

At (E),commodities were

rising (bearish),rates were

rising (bullish).Dollar neutral.

At (F)commodities were

rising (bearish), rates werefalling (bearish). Dollar down.

(A)

(A)

(F)

(E)

(D)(C)(B)

(A)

(B)

(B)

(C)

(C)

(D)

(D) (E)

(F)

(F)U.S. Dollar

CRB Index

3-Month Rates

When commodities and short-term rates arein opposition, the U.S. $ trend is decisive.



75/81

04 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

3.0

3.1

3.2

2000 2001 2002 2003 2004

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

2-Yr. Yield 2-Yr. Note

Yields rose from 1.4 %

to 3.2% in a few months

You might be tempted to take advantage of the much higher short-term yields thatwere available, which would be okay, if you did it properly.

At (A), the 2-Yr. Bond turned lower, so while you would benefit from the higher

current yield, you would lose principal as prices declined.

Holding a bond to maturity, rather than buying a bond fund, avoids principal risk.

WeeklyDaily

75

A

InterInter--Market Summary and BiasMarket Summary and Bias


76/81

76

Commodities turn

up from a downtrend

Market Event AnalysisRising commodities are considered inflationary (bearish), but

initially it indicates increased demand (growth, bullish)

Commodities turndown from an uptrend Falling commodities are considered non-inflationary, butinitially it indicates decreased demand (contraction, bearish)

Long-term yields turn up

from a downtrend or base

Rising long-term yields are viewed as bearish, but initially it

indicates increased demand-growth bullish.

Long-term yields turning

down from an uptrend or base

Falling long-term yields are viewed as bullish, but initially

it indicates decreased demand-growth.

Short-term yields turn up

from a downtrend or base

Rising short-term yields are viewed as bearish, but initially it

indicates the need to slow growth, bullish.

Short-term yields turningdown from an uptrend or base Falling short-term yields are viewed as bullish, but initially itindicates the need to stimulate growth, bearish.

What Is The Trend and How Long Has It Been Trending?What Is The Trend and How Long Has It Been Trending?


77/81

77

CM LTY STY

CM LTY STY

CM LTY STY

CM LTY STY

CM LTY STY

Inter-Market Event Inter-Market Analysis

Rising CM bearish for U.S.$, LTY-STY narrowing, so check spread

Rising CM bearish for U.S.$, LTY & STY rising, so inflation concerns

Falling CM, rising STY bullish for U.S.$, inflation concerns low. EURO?

Falling CM and STY neutral for U.S.$, LTY some inflation concerns

Rising CM and falling STY bearish for U.S.$, LTY inflation concerns

Higher or lower inflation is not necessarily good or bad. The important thing

is what the Fed and Bond Market believe about it.

Monitoring Gold, the U.S.$ and long-term bonds is a means of assessing theeffectiveness of the Feds actions. Is Fed raising or lowering short-term rates?

If (a) Gold begins to stabilize or move lower, and (b) the U.S. $ begins to

stabilize or rise, and (c) long-term bond yields stabilize or move lower, these

show approval of the effects of the Feds actions (rising rates) against inflation.

InterInter--Market with Breadth and SentimentMarket with Breadth and Sentiment

5 0

5.5

2 0

300

350

0 8

0.7

McClellan Oscillator 10-MA NYSE TRIN


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782004 M A M J J A S O N D

255

260

265

270

275

280

285

290

1060

1070

1080

1090

1100

11101120

1130

1140

1150

1160

1170

1180

1190

1.01.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2004 Mar Apr May Jul Aug Sep Oct Nov D

-400-350

-300

-250

-200

-150

-100

-50

0

50

100

150

200

250

2004 Mar Apr M ay Jun Jul Aug S ep Oct Nov D

1.8

1.7

1.6

1.5

1.4

1.3

1.2

1.1

1.0

0.9

0.8

2004 Mar Apr May Jul Aug Sep Oct Nov D

0.90

0.85

0.80

0.75

0.700.65

0.60

0.55

0.50

0.45

0.40

0.35

2004 M A M J J A S O N D

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

O

CRB

S&P 500

30-Year, Green

5-Year, Purple3-Month, Red

5-Day Equity P/C Ratio AAII Bull Ratio

At (A), the S&P blasted to new highs

CRB Index (B) breaking to a new high

Yields (C) slowly beginning to move higher

Short-term Breath and Sentiment indicators

(B)

(A)

(C)


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Concluding ThoughtsConcluding Thoughts


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80

You now have a solid foundation of the inter-relationships between Bonds,Commodities and Currencies.

Now you can interpret comments by the media with the confidence to knowwhat is pertinent and what is noise.

You now understand what has the potential to set up a long-term reversalpoints in the market.

Your understanding of this information, coupled with the other componentsof The Pristine Method, empowers you to be objective and self-reliant.

Get the pertinent data to setup and interpret in a routine manner based on

your time frame and Trading Plan (www.pinnacledata.com).

Concluding ThoughtsConcluding Thoughts


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At this point, you have the pertinent information that makes inter-

market analysis valuable. Its up to you to work with the material

and now make it yours, in accordance with your trading style.

You do not need to be an economist or analyze the vast amount of

information. With this information, you should be able to analyze

inter-market relationships and make intelligent trading decisions.

Define an opportunity where the odds are in your favor, then have

the discipline to follow your trading and money management rules.

In closing, we at Pristine wish you great success!

81

predicting trends intermkt analysis

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