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The attached zip file contains 4 gif images. I did this to save space. If
you do not prefer a zipped file I can email these as separate images if
you email me and request it.
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I have been examining the interrelations of the world markets via the Fx
markets (the Fx_Usd in particular). One of the studies I have done is to
examine the cross correlations of the Dem_Usd, Frf_Usd, Jpy_Usd & Gpb_Usd
against the S&P 500 Index. I have examined these relations back to 1997
(all the data I had at the time) and found that the cross correlations of
the Fx markets provide very useful information in predicting the
direction of the S&P 500. I was particularly curious about looking at
these patterns in light of the recent news about some major hedge funds
closing down or curtailing their equity participation. As for my
analysis, it appears that the Dem_Usd and the Frf_Usd are displaying the
highest correlation coefficient (.739) with a lead time of 38 days
(trading days). The outlook for the S&P does not appear particularly
attractive on the up side. (could this be why some of the hedge fund are
scaling back?). While some of my other indicators are showing a strong
possibility of a rally next week( a volatility reflex, sort of like a
reverse after shock), I would look at this as an opportunity to go short
(or at least increase cash). I should also add that I have showed some of
this to industry "Professionals" and was informed the "results are not
conclusive". This is my outlook and I welcome any comments and opinions,
"Professional" or not , as to this analysis and its method.
Ron McEwan
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