FXA

FXA, an ETF for tracking the Australian Dollar was helpful in that it often has a leading relationship with the market. When the SPY looked like this...

it was a very edgy situation, the market could have broken to new lows almost any day. The long term 60 min 3C chart of the SPY was positive and it's what kept me believing we would see a bounce of some significance as we have over the last 4 days. However, the FXA also showed better relative strength then the SPY which as a leading indicator was another piece of the puzzle pointing to the bounce theory.

Here's the FXA now...

Although the last time I used it as piece of the puzzle, it was over a much broader period. However, when I first showed the relationship of FXA and the market, there were numerous examples of longer duration and shorter duration. Above the FXA is in green and the SPY in red. One of the points of a bounce in the market was to cause a short squeeze and set up short positions. This morning we saw a short squeeze as the SPY crossed multiple trendlines (resistance)-laterally and the downtrend line. Note how the FXA didn't put in a strong day yesterday and today while the candle looks strong, the % gain and position is out of sync with the market, once again hinting at a piece of the puzzle in which the relationship between FXA and the market is often a leading indicator.

I'm not saying I think the bounce is over quite yet, but we are seeing several different signals and are at an area in which we want to pay close attention for a reversal.