Customer Reviews

Intermarket Analysis: Profiting from Global Market Relationships (Wiley Trading)

5 star:		(9)
4 star:		(7)
3 star:		(2)
2 star:		(1)
1 star:		(0)

 

 

The original book Intermarket Technical Analysis was great for its time, however some of the relationships it described change in a deflationary environment which the author suggests we are in. However, the best reason for the rewrite was the writing in the earlier book was terrible in my opinion. It was a terribly boring book -- even if you are interested in the topic.

This book is different, and is a much better book. It also seems to me that the sector analysis coverage is a little more thorough (although I have not opened them up side by side to tell).

The only downside of this book is I don't think it gives you as many practical tools for tracking the business cycle and sector rotation as Pring's book, how to select stocks using technical analysis. It will give you the basics though, relying heavily on comparative relative strength.

If you want to see the big picture and understand how the markets are tied together, I can without hesitation recommend this book. There are several other books that complement this one as well.

John Murphy's "Intermarket Analysis" is an updating of his excellent 1991 text "Intermarket Technical Analysis". Both books are the most clearly written and thought-provoking texts on this topic that I have encountered.

In the interest of disclosure, let me say that I do not know Mr. Murphy; nor has he or his publisher solicited this review. His editor at Wiley, Pamela Van Giessen, also edited a book I wrote on The Psychology of Trading. Knowing Ms. Van Giessen's integrity in a business that too often lacks that virtue, and having enjoyed Murphy's first book on the topic, I was eager to give "Intermarket Analysis" a thorough read.

Murphy begins with a review of the markets from the 1980s, recapitulating themes from the first book, including the close linkages among the currency, bond, commodities, and stock markets. His discussion of the role of oil and gold in economic slumps and booms is first rate, as he traces the interplay among these markets during the first Persian Gulf War and then during the "stealth bear market" of 1994. Throughout these presentations, Murphy captures qualitative relationships between markets that provide inspiration for traders interested in quantitative modeling. For example, the relationship between oil stocks and crude oil prices and the CRB/Bond Ratio are promising tools in capturing shifts in commodity prices that tend to impact the stock indices. I was particularly intrigued by his presentation of sector relationships during economic/market cycles, including the relative performance of cyclical and consumer stocks.

Where Murphy's book really shines, however, is in its explanation of intermarket relationships in a deflationary environment. He captures these relationships in his account of the recent bear market, drawing upon such diverse intermarket relationships as semiconductor stocks, Japanese markets, the Australian dollar, and the yield curve. This alone is a major advance over his previous text. At the end of the book, he traces the start of the recent bull market, illustrating the transition from a deflationary environment to an inflationary one--a pattern that also occurred after the great bear market of the 1930s.

Weaknesses in this book, from this reviewer's perspective, include an overemphasis on charts and visual data at the expense of quantitative treatments and a glib treatment of the Kondratieff Wave (long-term economic cycles). That having been said, this is an excellent market book. The presentation of sector rotation during economic cycles alone provided enough ideas to keep me busy with modeling efforts. Chart-based technical analysts and quants alike can find value in Murphy's work.

Brett Steenbarger
www.brettsteenbarger.com

I find myself always picking up this book for questions involving intermarket relationships. Stocks, bonds, commodities. There are even historical reviews of intermarket relationships in the book as well. Don't be fooled by the title, the author does discuss US markets very well. It is an easy read without technical jargon. Sure, the Phd of economics would probably be quite bored with the material but for the layman and BA student....this is a terrific reference with all meat and no fat!

The author is definitely an avante garde in the field of intermarket analysis, considering the first version of this book was published in 1991. However, with the advance in IT, the sophistication of today's market, and that traders can easily "cross" and "correlate" whatever they want on a "trade station" PC platform, the material provided in this second version becomes much less helpful than what it's predecessor then offered to its readers over a decade ago. Though much had been updated, I am afraid it still can't satisfy the savvy investors/traders of the day. As a pragmatic reader/trader, I must complain that the author had told little about the skills/techniques for identification of inflationary/deflationary cycles and the respective opportunities in sector rotation, thus asset allocation and trading/investment strategies. However, the author did show that history apparently didnt repeat itself in the relationships between bonds, commodities, stock, and currencies. You will simply go bankrupt if you bet on a strategy that worked perfectly in the past.

In case you are still not aware of the significance of the correlations of different classes of investment vehicles, this book can be quite a good start for you. If you are a veteran, please give this a pass.

p.s. Below please find some stuff that I think may be helpful (with a relatively high chance of recurrence) for your future investment/trading decision.

In the past, inverted yield curves have usually marked the end of economic expansions and the end of bull markets in stocks. pg 99

During a business cycle from early expansion to late contraction, various sectors thrive in the following order:- Transportation, technology, services, capital goods, basic materials, energy, consumer staples, utilities, financials, consumer cyclicals. pg 110

Martin Pring divides the business cycle into six stages:- Bonds up, stocks up, commodities up, bonds down, stocks down, commodities down. pg 183

This book will be helpful to those seeking an introduction to the interrelatedness of the currency, commodity, equity and fixed income markets. The book was well written and easy to read. However, I would not suggest the book to a person with no technical, economic or financial background.

Although I respect Mr. Murphy's work, he, like most technical analysts, can tell you with 100% accuracy exactly what happened.........yesterday. He really did do a good job on a very difficult topic, but the historical analogies referenced imply that the interrelatedness is rudimentary and predictable.
After a very detailed history of the four major market relationships, Murphy finally concludes that some of the historical tendencies are currently being challenged and that only time will tell if a new relationship has emerged or if history will again be proven right.

As John pointed out in an interview for Stocks & Commodities magazine with the author, it was his original goal to write the quintessential intermarket book but then found the topic so involved that each chapter could have become a book. There is just so much to discuss. Attempting to cover anything but a small snippet in a review is sheer folly. It is also impossible to do the book justice.

One technical analyst sent this author an email recently saying that she considered Murphy's first book on the subject, Intermarket Technical Analysis, to be one of the top three books on technical analysis. Those who liked his first book will absolutely love this one. This reviewer considers it to be one of his top three current technical analysis/market references.

Murphy is perhaps the only man alive today that could have written Intermarket Analysis with such conviction. As he mentions early in the book, anyone with the benefit of hindsight can choose what indicators would have worked best. There is no skill in that. What gives him the credibility to analyze what was happening at the time is that he was doing it daily for his subscribers to the MurphyMorris Market Message Newsletter online and much of the book is documented with excerpts and detailed charts written at the time the events were unfolding.

The book is well written and very readable with plenty of examples to demonstrate each key point. The business cycle and all important market cycles are discussed from the seasonal best time to be in the market (November through January) to the 54-year Kondratieff Long Wave Theory. It will be a book that one will read repeatedly as well as an essential reference to come back to time and again as new market events unfold.

There is also little doubt that this book will become a market best seller. But it will not become the sole domain of the technical analyst and trading community. Everyone who plays the markets will want to read it. It is not simply about trading or technical analysis, but about markets and how to operate within a global framework in the four asset classes and effectively gather crucial up-to-the-minute intelligence to make the best-informed decisions.

Murphy makes one fact crystal clear. There are a number of essential intermarket relationships of which to be aware, any one of which could save your financial bacon at the right time. The implied corollary is that ignorance of any one of them could prove fiscally catastrophic.

Markets have become so interdependent in the last decade, a correlation that continues to strengthen with time. If those who suffered financial ruin between 2000 and 2002 had read his first book, how many of them could have avoided huge losses and even profited from what occurred? We will never know for sure but is it a risk they anyone can afford to take, especially when considering that the cost of avoidance (cost of the book) is less than $50?

(Re-printed from Traders Mag with permission.)

Matt Blackman - Technical Writer/Reviewer Email: matt@tradesystemguru.com
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Contributor to Stocks & Commodities Magazine, Working Money, Traders.com Advantage, Active Trader, Traders Mag (Europe) and SFO Magazine

Any economist would consider markets related, often in very complex manner. This book takes up these theme and presents a lot of examples mainly from the 90s and onwards. The descriptions have an ad hoc feel to them. One is left wondering "so what?". In my view all this descriptive content has to lead up to some kind of useful theory for trading. Or at least an approach. This is unfortunately totally lacking. If markets are interrelated the easist way to show that is through correlation analysis. That is very crude but would be a beginning. The author could have provided past correlations in different periods so that the reader gets an understanding of what the relationships are and how they might change. The author earlier had a green book with same/similar title, and that dealt mostly with the 80s and had the same problem. The author might be a pioneer in the area, but he is sadly not learning. He seems to keep to himself in an isolated manner. I don't want belittle the author, but just being an early proponent isn't good enough for a high book rating.

A lot of proprietary research is done in this area. Unfortunately it is not published and this book is probably the best available. Still I cannot give it more than 2 stars.

I have written several short reviews on trading books. The best way is to compare the score on the books I've read. Many reviews on amazon.com are just glorious 5 star reviews. I use all five categories; sorry but everything isn't "great". Books rated 5 are very good. Books rated 4 are good solid books well worth reading. Books rated 3 can be bought by some people who read a lot or have very specific needs. Books rated 1 or 2 I would not recommend buying or reading. Naturally all in my humble opinion.

This is one of the best books on finance I have ever read - (I have over 200 books on finance). Most finance books only analyze that portion of the market relevant to their system. This book does a great job of pointing out the interactions that affect the different investment markets and how these interactions affect investment categories such as stocks, bonds etc.


Key features of the book:


1. Factors that affect different investment categories such as bonds, currencies, stocks.

2. How these factors impact stocks, bonds, currencies etc.

3. How interactions between stocks, bonds, currencies then affect the financial markets.

4. Provides a list of key factors to watch in order to detect shifts in the markets.


Finally, Intermarket Analysis is not your typical dry finance book with page after page of equations and text. Instead, the author John Murphy, has filled this book with visually attractive charts and graphs which do a great job of conveying his message.

John Murphy's Intermarket Analysis is a thesis that markets such the currency, commodities, bond, stocks, and market sectors are and have been inter-related.

This is a pretty good book. This book offers a very big picture of the global markets. If you're trading experience only encompasses the past 3 years, this book give a bigger picture from 1980 and 2003.

Note that this book was copyrighted at 2004, so there is no mention of the 2007-2008 crash. Nevertheless, this book shows relationships between markets and offers ideas on why one influenced the other.

Before reading this book, I mostly looked at daily, hourly, and 30 min charts. After reading this book, I now look at the daily, weekly, and monthly charts. Also, I was pretty weak on what happened during the 80's, 90's, and early 00's. This book explains a lot about those years.

I would recommend this book to intermediate investors who want to understand the behavior of markets and who want to learn the direction of markets from 1980 to 2003. If you're a beginner investor, you might want learn basic technical analysis. This book is not a primer.

Probably the most bizarre thing about the stock market is it's explosive rallies and catastrophic crashes. Both occur with little warning and seemingly with little reason, but by studying intermarket analysis you quickly learn the relationship between currency trends, commodity prices, bond yields and their strong influence on the bond and stock markets. This book is one that every serious investor should own.