CTA Intermarket Analysis & Asset Allocation

Question 1

In intermarket analysis, what is the typical historical relationship between bond prices and stock prices?

Accepted Answer

They often move inversely — rising bond prices (falling yields) can support stocks, while falling bond prices (rising yields) may pressure stocks

Answer

Intermarket analysis (popularized by John Murphy) recognizes that rising yields increase borrowing costs and compete with equity returns, typically creating a negative relationship with stock valuations.

Question 2

According to intermarket analysis, what is the typical relationship between commodity prices and bond prices?

Accepted Answer

Rising commodity prices (inflationary) tend to push bond prices lower (yields higher) as inflation erodes bond value

Answer

Commodities and bonds historically have an inverse relationship — rising commodity prices signal inflation, which reduces the real return on bonds, pushing bond prices down and yields up.

Question 3

In intermarket analysis, which asset class is typically considered the first to turn at major economic turning points?

Accepted Answer

Bonds

Answer

Bonds typically lead the economic cycle, turning bullish first as recession approaches (falling rates) and turning bearish first when expansion takes hold and inflation pressures build.

Question 4

What does 'relative strength analysis' between two markets tell a technician?

Accepted Answer

Which market is outperforming the other, helping identify leadership and optimal allocation

Answer

A relative strength ratio (dividing one asset's price by another's) reveals which is outperforming — rising ratio lines show leadership, helping technicians rotate into stronger markets.

Question 5

The US Dollar Index's relationship with commodity prices (especially gold and oil) is generally:

Accepted Answer

Negatively correlated — a stronger dollar tends to push commodity prices lower

Answer

Since most commodities are priced in US dollars, a stronger dollar makes them more expensive for foreign buyers, reducing demand and typically pushing prices lower.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Intermarket Analysis & Asset Allocation