The Japanese Yen
A weak yen has gone hand-in-hand with stronger performance for risk assets, while a strengthening yen typically has been accompanied by selloffs. Now, the yen is again moving higher in conjunction with the stock-market weakness of the past month, and it is in a position to break out into territory that could signal additional trouble for equities.
The easiest way to keep track of this is to watch the charts of the CurrencyShares Japanese Yen Trust (FXY). The ETF, at just above $96 at mid-day Tuesday, is closing in on its 200-day moving average — a level that it last surpassed in autumn 2012. If the yen moves above this level, it would be the clearest sign yet that the current downturn in equities could morph into more than a garden-variety correction.
The Bottom Line
Is this correction a buying opportunity or just the first sign of larger issues to come? Nobody can say for sure just yet — but the charts of these three indicators are traders’ best bet for an early warning.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.