Compare, Compare, Compare

Did you know that's what "3C" stands for? No one indication itself can give you a high probability trade, as much as we have al looked for that Holy Grail of indicators, that can only be found in risk management.

However I do get a lot of charts from members and I'm thrilled to see them thinking outside of the box, making comparisons that I might never have thought of, not all are useful, but a lot of the time there's at least something that can be learned and I think you have to be a lifelong student of the market and look at other people's findings.

One of our member's sent me this chart, you may recognize it or you may not, but I've been showing the same thing in a different format for weeks.

If you click on the image, it should open to a larger view. What he has done is take two currency ETFs, FXE for the Euro and FXY for the Japanese Yen (yellow) and is using them just like you would the EUR/JPY pair that I have been featuring as "trouble" for the market, that is to say that when the yellow line moves up, the Euro is stronger and the Yen is weaker, same principle as the EUR/JPY that I posted even in tonight's last post. Then he added the SPX in green and shows with red arrows on the currency pair showing the reversal of the EUR/JPY to the downside and blue arrows on the SPX (showing it moving up), the effect is a negative divergence and the SPX moves down . He also shows1 positive divergence. Note the pair of currency ETFs he is using, FXE/FXY start an uptrend in August which is supportive of the market and shows a current negative divergnce between the FX ETFs and the SPX right now.

This is the same thing I have been talking about, it's the Carry Trade being unwound.

Here's what it looks like with the FX pair...

 The daily chart starts moving up in August just like his yellow line.

Looking closer, as we enter February the pair is no longer moving up, but is lateral, it's already in a negative divergence with the SPX just as he's shown. This is basically two ways of showing the same thing, except he used the ETFs where as I used the actual FX pair, but his chart is nice in that it shows previous negative divergence between the FX pair and the SPX and what happens next.