Currencies

 The $AUD gapping down today, remember this has had good correlation and has been an excellent leading indicator for the market.


 Looking at the longer term trend in the $AUD vs the SPX, one thing is clear, big moves down in the $AUD have not been good for the market and secondly, negative divergences in $AUD have tended to call reversals in the SPX. We are now at our widest divergence in the $AUD/SPX (remember the post an hour ago about the fractal nature of the market? Well if $AUD is calling all these top reversals on small divergences, think what the larger trend divergence means).

 I pointed out this divergence yesterday in the Yen vs the SPX, when the Yen rises, the market typically falls, this has to do with the cost of the carry trade. Intraday we had the divergence yesterday, we are seeing downside in the market today and the Yen is moving up intraday.

The longer term trend is important as well, the little red and green arrows show the nature of the inverse correlation between theYen and the SPX, however the trend of the Yen is a much larger divergence with negative implications for the SPX. The BOJ is not going to like an appreciating Yen, but historically BOJ interventions have had very little effect on the YEN, at least not for very long.