Can Futures Play A Role In Asset Allocation

With the development of financial futures over the past twenty years, futures traders can now participate in all financial sectors. Individual commodities, representing the oldest sector of the futures world, can be traded on various exchanges. Metals and energy markets are traded in New York, whereas most agricultural commodities are traded in Chicago. CRB Index futures provide a way to use a basket approach to the commodity markets. Interest-rate futures provide exposure to Treasury bills,...

Figure 116

HEATING OIL FUTURES (UPPER CHART) COMPARED TO A HEATING OIL CRB INDEX RATIO (BOTTOM CHART). HEATING OIL HAS BEEN THE WEAKEST OF THE ENERGY MARKETS DURING THE LAST 100 TRADING DAYS. IF THE ENERGY MARKETS BREAK DOWN, HEATING OIL MAY BE THE BEST SHORT-SELLING CANDIDATE BECAUSE OF ITS WEAK RELATIVE-STRENGTH RANKING._ April 1990 Heating Oil Futures Contract-100 Days 9-27 1M 10-1110.18 10-25 11-1 11 -S 1T.IS 11-22 11 -30 12-7 I2-H 12-21 12-291-8 1.15 1-72 1-29 2-5 2-12 Relative Ratio of Heating Oil...

Golda Key To Vital Intermarket Links

Since the gold market has a strong inverse link to the dollar, the direction of the gold market plays an important role in inflation expectations. A peak in the dollar in 1985 coincided with a major lowpoint in the gold market. The gold market top in December 1987 coincided with a major bottom in the dollar. The dollar peak in the summer of 1989 coincided with a major low in the gold market. The gold market leads turns in the CRB Index. The CRB Index in turn has a strong inverse relationship...

Summary

The relationship between the U.S. dollar and bonds and stocks is an indirect one. The more direct relationship exists between the U.S. dollar and the CRB Index, which in turn impacts on bonds and stocks. The dollar moves in the opposite direction of the CRB Index. A falling dollar, being inflationary, will eventually push the CRB Index higher. A rising dollar, being noninflationary, will eventually push the CRB Index lower. The bullish impact of a rising dollar on bonds and stocks is felt when...

New Dimension in Technical Analysis

One of the most striking lessons of the 1980s is that all markets are interrelated financial and nonfinancial, domestic and international. The U.S. stock market doesn't trade in a vacuum it is heavily influenced by the bond market. Bond prices are very much affected by the direction of commodity markets, which in turn depend on the trend of the U.S. dollar. Overseas markets are also impacted by and in turn have an impact on the U.S. markets. Events of the past decade have made it clear that...

All Markets Are Related

What this means for us as traders and investors is that it is no longer possible to study any financial market in isolation, whether it's the U.S. stock market or gold futures. Stock traders have to watch the bond market. Bond traders have to watch the commodity markets. And everyone has to watch the U.S. dollar. Then there's the Japanese stock market to consider. So who needs intermarket analysis I guess just about everyone since all sectors are influenced in some way, it stands to reason that...