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Bulls Beware: Bond and Currency Charts Say It's Not a Pretty Picture Outside of Stocks


Treasury yields may flip the bullish switch with a rally into today's close. Shy of that, though, bonds and currencies are telling us that all is not yet well underneath the surface.


The yen is staying on the rails of the crazy train (to the downside) – with all due respect to Ozzy and friends.

One of the only charts looking worse (for those bullish of the yen) than the chart of the Canadian dollar is that of the Japanese yen (@JY). The yen crossed and looks destined to close the week out below the 161.8% Fibonacci price projection for this third wave move to the downside. A break of that support at 1.0683 should theoretically open up the door for a continued move in the yen down to the 261.8% projection line all the way down at 0.9291. Under normal circumstances, I would read the free-falling yen as a "risk on" message. Should the fact that their own government is pushing things around like this matter? Part of me says, "Yes," but the trader in me says, "Who cares what the reason is?" Let's just give this one to the bulls for now.

Click to enlarge

Outside of the falling yen, I'm not seeing anything from the currency markets that would confirm the bullish action in US stocks right now.

All in all, not a pretty picture outside of stock land.

So currency markets are a wet blanket for the bulls. For that matter, not much in the bond markets is exciting me either. Perhaps we will see Treasury yields break out above "correction resistance" and push some money out of bonds and into stocks. But nothing else in bond or currency land is doing anything but acting as a bearish divergence from what we're seeing in our stocks. This is not a recipe for the warm and fuzzies.

I'll put it this way: Were it not for our Fed and the Bank of Japan, where would we be? I'm sure that's why Bennie and his Japanese counterparts are so adamant about not only remaining dovish but also really pushing their agenda forcefully down everyone's throats. The big question is: Can they do this in perpetuity and without negative consequences? "Perhaps – and not likely" would be my initial answers.

That's all for now – have a great weekend!

Twitter: @seachangereport

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