CTA Intermarket Analysis & Asset Allocation 2

Question 1

Which technical indicator is commonly used to compare the performance of two securities in relative strength analysis?

Accepted Answer

A ratio or relative strength line (Price A / Price B)

Answer

A relative strength ratio line is created by dividing the price of one security by another — when the line rises, the numerator security is outperforming the denominator.

Question 2

In the context of the business cycle, which sectors are typically associated with the early expansion phase?

Accepted Answer

Consumer discretionary and financials

Answer

Early in an economic expansion, consumer spending and lending increase first, benefiting consumer discretionary and financial stocks before the cycle broadens to other sectors.

Question 3

What does a 'yield curve' indicate, and why is it important in technical market analysis?

Accepted Answer

The relationship between interest rates and maturity dates for bonds; an inverted yield curve has historically preceded recessions

Answer

The yield curve plots interest rates across different bond maturities — inversion (short rates exceeding long rates) has been a reliable leading indicator of economic recession.

Question 4

In intermarket analysis, gold is often viewed as a leading indicator for which asset class?

Accepted Answer

Other commodities and inflation expectations, and an inverse indicator for real interest rates

Answer

Gold often leads the broader commodity complex and reflects inflation expectations; it tends to rise when real interest rates (nominal rates minus inflation) are declining or negative.

Question 5

The concept of 'intermarket divergence' signals a potential warning when:

Accepted Answer

Two correlated markets that normally move together begin to diverge in direction

Answer

When historically correlated markets (like the S&P 500 and copper prices) diverge, it raises a red flag — one market is potentially giving a misleading signal and a resolution is likely coming.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Intermarket Analysis & Asset Allocation 2