Ratio analysis provides a useful technical tool for spotting trend changes in these intermarket relationships.

When deflation is a threat, however, this decoupling can last for several years.

One of the basic premises of the technical approach is that the price action in each market (and each stock) is also a leading indicator of its own fundamentals. In that sense, chart analysis is just a shortcut form of economic and fundamental analysis. This is also why the intermarket analyst uses charts.

took a lot of people a long time to recognize that a major change had taken place in the bond-stock relationship, and even longer to understand why.

There is nothing theoretical about a profit and loss statement. Economists look at statistics to determine the direction of the economy and, by inference, the direction of financial markets. Chartists look at the markets themselves. This is a big difference. While economic statistics are usually backward-looking, the markets are forward-looking. It

It was also another manifestation of the intermarket reality that financial trends are usually global in nature.

Warnings came from sector rotations out of late expansion stocks into early contraction stocks.

Sector and industry trends are global in nature and transcend national boundaries and geographic regions.

Bonds have a tendency to peak about midway through an economic expansion and hit bottom about midway through a contraction.