Other markets may be pointing to equity correction.

The past 24/48 hours has seen some big swings on Bonds, FX and Equities, though ultimately in many cases they have not actually move that far. The US has a public holiday which may induce a calming effect on markets for today. A few notes on a couple of themes I touched on yesterday:

GBPUSD FX bounced strongly, and has broken the 1.6135 area which I thought may cap it. The strong bounce has also kept the Cup + Handle pattern scenario alive, though the '3 Black Crows' patten I highlighted yesterday still weighs heavily on this, for now I would like to sit back and see how this develops and whether the 1.6200 area can cap this for now.

EURUSD FX continues to under perform, linked closely to shenanigans occurring on the periphery of the Eurozone. Although it overshot the 1.3700-1.3800 support zone yesterday, it did not proceed too much further, and I think this zone may still offer some support, however the ease with which 1.3700 was broken does not bode well. 


The sustained strength of GBPUSD and recent weakness of EURUSD fits well into EURGBP FX moving lower. A couple of weeks ago this cross rejected the upper line of a large downward sloping trend channel which has been forming over the past 2 years, this suggests further significant weakness may be a theme for EURGBP in coming months (See chart below).

A couple of other developments which may be significant. USDJPY FX may be putting a base in. I say 'may be' because trying to pick or even identify a bottom on the USDJPY is tantamount to skating on thin ice. The chart below is the 2-Day Candle chart over the past 9 months. 

Also the US 10 year yield has possibly completed an Inverted Head + Shoulder pattern, the chart below shows the US 10 year yield daily. If this is confirmed over the next few trading days, yields could push back over 3% in the next few weeks

To summarise, it looks as though some of the trends of recent weeks are under threat or facing corrective forces (EURUSD,USDJPY,10 Year Yields). These markets moved pretty much in tandem with the SP500 rally in recent weeks, if a correction were to take hold on these markets, this may suggest a co-ordinated correction in equity markets over the next few weeks.