Interview: Understanding Intermarket Analysis With John J. Murphy by Matt Blackman
John Murphy has become a household name in the technical analysis
community. And how could he not? He was the technical analyst for
CNBC for seven years, and is the cofounder and president of
MurphyMorris.com. His book Technical Analysis Of The Financial
Markets, first written in the late 1980s, has become a classic, and its
latest edition is required reading for those studying for the Market
Technicians Associationís Chartered Market Technicians (CMT) designation.
He is also the author of The Visual Investor and Charting
Made Easy, and writes the Murphy Market Message, an online
newsletter that can be found on StockCharts.com.
His latest book on the subject of global market relationships,
Intermarket Analysis, has just been published. It updates many of the
relationships discussed in his earlier texts, and explains pivotal
market changes that have occurred since 1990. STOCKS & COMMODITIES
contributor Matt Blackman spoke with John Murphy via telephone
on December 2, 2003.
When did you first get interested
in intermarket analysis?
Early on. When I first
started working as a Early on. When I first
started working as a technical analyst in the late 1960s, I was a
stock analyst. In the 1970s, I gravitated
toward the commodity market and I was
in the futures business for the next 15
years while it went through an evolution
from hard commodities like grains
and corn into financials and currencies.
I was there in the mid- to late 1970s,
when contracts on currencies and US
Treasury bonds were introduced, and in
the early 1980s, when they introduced
stock index futures.
The stock market people on Wall
Street just looked at stocks, and commodity
people just looked at commodities.
But in the futures world, we were
trading commodities, currencies,
stocks, and bonds, and we were the
only ones doing this. For the first time
we had everything in one pile and we were trading it all. I was
managing money at the
time and witnessed a number
of correlations firsthand.
The origins of intermarket
The real key was when I
started working for the
Commodity Research Bureau
(CRB) as a consultant. When the New York Futures Exchange
launched a futures contract on the CRB
index in the mid-1980s, I had access to
all the research that had been done, and
it referred to correlations with stocks
and bonds. That solidified my belief
in the strong correlation between commodity
prices and bonds, and thatís
how it evolved.
The key factor was the evolution of
the futures industry. A futures trader
has access to all the markets, and itís
only a matter of time before you start
seeing the correlations.