What is Intermarket analysis?

Intermarket analysis basically refers to the concept of examining more than one related asset class or financial market to determine the strength or weakness of the financial market or asset class being considered. It's like looking at the big picture instead of focusing only on the single market. You can consider it an expansion of your analysis scope.

While Intermarket analysis does provide a broader look at the equities market by correlating different asset classes, it's not always dead-on accurate. I mean, it's basically built on the assumption that all the markets are correlated which isn't always the case. Also, these relationships can and do change over time. It's a tool but far from a crystal ball, if you catch my drift. You might run into some serious danger if it's the only thing you're relying on for your investment strategy. Worth considering, but don't put all your eggs in this one basket, you know?

Intermarket analysis can also be a handy tool for risk management, helping you to hedge by identifying less obvious market relationships.

Exploring how diverse markets influence each other can highlight emerging trends that might not be as evident when looking at a single market in isolation. This approach often illuminates global market dynamics and can be particularly useful for pinpointing the flow of capital across different sectors and regions. It's about understanding the ripple effect one market can have on another and using that knowledge to make more informed predictions.