Take a look at the monthly chart of the S & P 500 chart below. It never sustained the highs set back in 2000. So seven (almost 8) years later, we're there once again and it's looking like we're not going to head to "higher highs". It appears thjs coming recession will cause the index to complete the double top formation in the upcoming months.
Click on the chart to enlarge it.
Now take a look at the daily chart going back a year in time. It's highs are starting to become lower. This is known as a head and shoulders pattern below. It's where you have two "higher highs" followed by a "lowe high" that just can't seem to make its way onto new highs. It's an initial sign of weakness and a potential trend change.
Also, the 50 day Simple Moving Average is crossing the 200 day Simple Moving Average. When this "all important" shorter term average crosses the "milestone" of the 200 period moving average....it's a bearish sign too.
With the Fed predicting slower growth next year and many retail stocks hitting 52 week lows (TGT and KSS), it doesn't look good.
Click on the chart to enlarge it.
So as this all unfolds...carry trades will furiously unwind. Look for EUR/JPY and GBP/JPY to especially get hit hard but they all will most likely be affected. The Japanese yen will rally hard against them all. It's going to be an ugly year for them as the pendulum swings the other way. However, stay tuned! I believe our commentaries will help guide you though the choppy waters.
Check out my subscription based site at www.money-trader.com for even more detailed info. We want to help you succeed in 2008 more than ever.
Sean Hyman
Editor/Trader www.money-trader.com
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