Educationmacro-compass
Intermarket Analysis: The Unified Theory
You are reading Lesson 4 of the macro-compass course.
1. The Dollar Smile Theory
The US Dollar is unique. It behaves differently depending on the global cycle.
- Left Side (Fear): Global Recession. Investors panic and flee to the safety of US Cash/Bonds. USD Rallies.
- Middle (Stagnation): US economy is weak, Fed cuts rates. Capital leaves US for better growth elsewhere. USD Falls.
- Right Side (Growth): US economy booms. Fed hikes rates. Capital floods back for high yields. USD Rallies.
Strategy: Identify where we are in the smile. Are we in Fear, Stagnation, or Growth?
2. Yields and Equities (The Discount Mechanism)
When the 10-Year Treasury Yield rises, it becomes more attractive to hold "risk-free" bonds than risky stocks.
- The Mechanic: High yields hurt "Long Duration" assets like Tech Stocks (Nasdaq).
- The Signal: If the 10-Year Yield breaks key resistance, look to Short the Nasdaq (US100) or sell high-PE growth stocks.
3. The Commodity Connection
Currencies are often proxies for hard assets.
- CAD (Canadian Dollar): Correlated with Crude Oil. If Oil breaks out, look for long CADJPY setups.
- AUD (Australian Dollar): Correlated with Copper/Iron Ore. If China reopens and Copper rallies, buy AUDUSD.
Rule: Never trade a commodity currency against its underlying asset trend.
4. Gold and Real Rates
Gold does NOT always go up during inflation. It goes up when Real Rates (Nominal Yield - Inflation) fall.
- Scenario: Inflation is 5%, but Interest Rates are 6%. Real Rate is +1%. Gold falls (Cash pays you to hold it).
- Scenario: Inflation is 5%, but Interest Rates are 2%. Real Rate is -3%. Gold rallies (Cash loses purchasing power).
Conclusion: The 4-Screen Setup
Don't just stare at candles. Set up a monitor with: 1. DXY (Dollar), 2. US10Y (Yields), 3. CL1! (Oil), 4. ES1! (S&P 500). When they all align, size up.
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