Murphy argues no market trades in isolation: the dollar drives commodities, commodities drive bonds, bonds lead stocks. The book proves this with 1970s-1989 chart pairs, but it hands you a way of looking, not a way of trading.
The one idea
The whole book rests on one chain: the dollar moves inversely to commodity prices, commodity prices (measured by the 21-market CRB Futures Price Index) move inversely to Treasury bond prices, and bond prices move in the same direction as stocks, usually turning first. Murphy calls the bond market the 'fulcrum' of the whole system because it sits between the inflation signal coming from commodities and the equity market that reacts to interest rates.
He backs this with correlation numbers pulled from a 1988 Powers Research white paper: an 82 percent positive correlation between the CRB Index and 10-year Treasury yields from 1978 to 1987, rising to 92 percent from 1982 to 1987, with commodities leading bond yield turns by about four months. A separate 1989 New York Futures Exchange study found a -91 percent correlation between CRB futures and bond futures, and a +94 percent correlation between bond futures and NYSE Composite futures, both over the twelve months from June 1988 to June 1989.
The payoff is a business-cycle rotation borrowed from Martin Pring's Asset Allocation Review: bonds turn up first, stocks second, commodities last, then the same order reverses on the way down. Geoffrey Moore's research (cited from Leading Indicators for the 1990s) puts numbers on it: across the eight U.S. business cycles since 1948, bond prices led cycle turns by an average of 17 months (27 months at peaks, 7 at troughs), stocks led by an average of 7 months, and commodities by 6 months.
What it actually teaches
Murphy's framework has four linked pieces rather than a single sequence, since each market feeds the next in a loop rather than a one-time order:
TRACK THE DOLLAR FIRST
A falling dollar pushes commodity prices up because imported goods and dollar-denominated commodities get more expensive; a rising dollar does the opposite. Murphy treats dollar direction as the upstream trigger for the whole chain, citing the dollar's 1980 bottom as the event that set off the 1980 commodity top.
READ COMMODITIES AS THE INFLATION GAUGE
The CRB Index (21 commodities, base year 1967=100) moves the same direction as bond yields and opposite to bond prices. In the book's cited data this relationship ran as high as 92 percent correlation over 1982-1987, with commodities leading bond-yield turns by roughly four months. Murphy also uses a 14-month stochastic oscillator on both the CRB Index and bond futures: a sell signal fires when the fast line crosses below the slow line above the 75 level, a buy signal when it crosses above the slow line below 25. A signal in one market should be confirmed by the opposite signal in the other; if both markets flash buy or both flash sell at once, Murphy says something is wrong and the trader should be cautious.
USE BONDS AS THE LEADING INDICATOR OF STOCKS
Bonds and stocks normally trend together, but bonds turn first. The book's examples: the September 1981 bond bottom preceded the August 1982 stock bottom by 11 months; the April 1987 bond breakdown preceded the August 1987 stock top by 4 months. Rule of thumb: a bullish bond forecast is a bullish stock forecast, and divergence between the two is a warning to tighten up, not necessarily to exit.
PLACE THE MARKETS ON PRING'S SIX-STAGE CYCLE
Stage 1: bonds turn up (stocks and commodities still falling). Stage 2: stocks turn up (bonds rising, commodities still falling). Stage 3: commodities turn up (all three rising). Stage 4: bonds turn down (stocks and commodities still rising). Stage 5: stocks turn down (bonds falling, commodities still rising). Stage 6: commodities turn down (all three falling, cash is king). Knowing which stage you're in tells you which asset class to favor next.
What it looks like Monday morning
A reader pulls up a bond chart before opening a stock chart, and a CRB Index or broad commodity chart before either. The practical change is sequencing: check the dollar, then commodities, then bonds, then stocks, and treat a divergence between any two of them (bonds falling while stocks make new highs, say) as a flag to tighten stops rather than a reason to trade on its own.
It does not produce an entry signal, a position size, or a stop-loss rule. What it produces is a habit of checking three other charts before trusting the one you're trading.
| Stage | What turns | State of the other two |
|---|---|---|
| 1 | Bonds turn up | Stocks and commodities still falling |
| 2 | Stocks turn up | Bonds rising, commodities still falling |
| 3 | Commodities turn up | All three rising |
| 4 | Bonds turn down | Stocks and commodities still rising |
| 5 | Stocks turn down | Bonds falling, commodities still rising |
| 6 | Commodities turn down | All three falling |
Murphy cites this as Martin Pring's idealized sequence; he adds that real markets deviate from it and that the value is in noticing when they do, not in mechanically trading each stage.
Trying to trade the markets without intermarket awareness is like trying to drive a car without looking out the side and rear windows.John J. Murphy, Intermarket Technical Analysis
Where it fails
- The correlations are drawn from one narrow window and never retested. The headline numbers (82 percent, 92 percent, -91 percent, +94 percent) all come from two outside white papers covering ten years or less, mostly the 1980s Volcker disinflation. Murphy reports them as settled fact with no discussion of sample size, no out-of-sample check, and no acknowledgment that a correlation measured over a single interest-rate regime may not survive the next one.
- The whole thesis is built on one incomplete business cycle. Murphy admits the data itself is thin: currency futures started in 1972, gold futures in 1974, oil futures in 1983, and stock index futures only in the 1980s. That means the book's real evidence base is essentially one full cycle, the 1982-1990 expansion, bookended by fragments of the 1970s. He says as much in the closing chapter, but the confidence of the earlier chapters doesn't reflect that thinness.
- The dollar-commodity-bond-stock chain broke down for long stretches after publication. The 2008-2015 period saw near-zero interest rates, falling commodity prices, and a rising stock market all at once, which does not fit Murphy's rotation. Quantitative easing decoupled bond yields from the inflation signal commodities were supposed to be sending, a regime this 1991 book has no mechanism for.
- Every chart example is narrated after the fact, with no losing signals shown. The stochastics buy/sell signals on the CRB Index and bond charts are walked through year by year, always landing on a correct call. There is no whipsaw example, no discussion of a false signal, and no measure of how often the 14-month stochastic setup would have been wrong across the full history it claims to cover.
- It is a framework book wearing a trading-strategies title. There are no entry rules, no stop placement, no position sizing, and no risk management anywhere in the text, despite 'Trading Strategies' in the subtitle. The 'method' section above is Murphy's own list of principles restated as steps; the book itself never numbers them as a system to execute.
- The Myth of Program Trading chapter oversells its own conclusion. Murphy argues program trading was a symptom of intermarket pressure in the 1987 crash rather than a cause, but he presents this as the correct account rather than one competing explanation. Later regulatory studies (including the Brady Commission's own findings) assign portfolio insurance and program selling a real mechanical role in amplifying the October 1987 decline, a nuance this chapter skips.
Who it is for
Buy it if
You want the historical case for why bonds, stocks, commodities, and the dollar move together, told through 1970s-1989 chart pairs and a clean six-stage business-cycle rotation you can hold in your head. It's a useful mental model for a macro-aware swing trader or portfolio allocator who already has a system and wants a second filter.
Skip it if
You're looking for an actual trading system with entries, stops, or position sizing, or you want evidence tested past 1990. Anyone who wants current intermarket relationships should look at how these correlations behaved through 2008 and 2020, both regimes this book predates entirely.
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