Intermarket Analysis and Leading Indicators are Necessary in the Global Economy
The truth is that traders don’t know how to incorporate a multi-market or ‘intermarket’ approach into their analysis. Many foolishly believe that they are doing intermarket analysis when they display a couple of markets at a time on one chart or display the spread between any two markets to see how they differ in terms of their price movements over time. To a long-time commodities trader and technical analysis expert like Mr. Mendelsohn, this is an extremely simplistic way to analyze relationships between markets, which he and his trading software customers outgrew in the mid-1980s.
Yes, it’s true that the relationships between two or even three markets can be visualized easily on a chart, and the statistical correlation or spread between any two markets can be computed effortlessly by almost any trader with a PC and practically any trading software. That’s not the point, though. The inter-relationships that exist within today’s global markets are powerful, subtle and very complicated, as literally dozens of markets simultaneously affect each other and the specific market or markets that you’re trading. There are key outside markets such as crude oil, the US Dollar Index, Gold and others which must be taken into consideration at the very least. Sometimes these relationships and their effects on other markets occur with leads and other times with lags that could be as short as a day or two or as long as a week, a month or even longer which can not be easily understood or visualized on a chart.
The only way to grasp the significance of their effects is through the use of mathematical processes such as those developed over the past quarter-century by Mr. Mendelsohn. Think how difficult if not impossible it would be for you to figure out the combined affects of dozens of related markets simultaneously each day on just one market that you’re trading. That’s the challenge that Mr. Mendelsohn first took up in the mid-1980s, as he searched to find a quantitative way to accomplish this goal.
Combine Neural Networks with Intermarket Analysis
As the markets continued to become increasingly more interconnected, evidenced by the October, 1989 global aftershock, Mr. Mendelsohn, intent on finding a robust way of capturing these intermarket dynamics, began to develop the second generation of intermarket trading software that would overcome the limitations of single market technical analysis and address the intertwined nature of the global markets using proprietary mathematical processes that he has continued to refine for the past twenty years. His research initially led him to apply an artificial intelligence capability known as neural networks to perform intermarket analysis on global market data.