Markets typically move in waves. For secular investors, the long waves with a duration of 6 months to 6 years are important. However, the 3 to 6 months waves convey information about the secular strength, and that is why we focus on the multi-month trends.

We believe that markets today are preparing for new trends. We rely on intermarket chart analysis to assess the highest probability moves, because intermarket dynamics sow the seeds for market specific trends.

Consider the key stock markets in the world. In the first chart set we look at the U.S. stock market (with the S&P 500 as proxy for U.S. stocks), European stocks (the Euro Stoxx 600 as proxy for Europe), emerging market stocks and China. The trending moves (up or down) are highlighted with a blue frame. We will discuss the green ovals later.

Stocks in the U.S. trended in 2013 and 2014. Since December last year, however, U.S. stocks have moved sideways. Stocks in Europe had a strong trend higher when QE was announced by the ECB but that rally stalled in April. Emerging markets saw a strong move lower in Q2 2013 and a sharp rally mid-2014. Overall, however, emerging markets are going nowhere. China is clearly the market with the strongest current trend. The rally has been ongoing for 9 months.

Commodities show a totally different picture. We have selected the key segments, softs (cotton, coffee, sugar, etc), 

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