A Huge Warning
A few weeks ago, I discussed how the Aussie-Yen would be able to offer warnings signs for the S&P 500 before it would start to correct. It is quite impressive that both of them are highly correlated; it is a very useful phenomenon. What is even more special is that this correlation is still working in this QE3-driven market. Right now the Aussie-Yen is giving some huge warnings signs by making lower highs, while the US Markets are make higher highs. What usually happens is the US markets will likely correct (refer to the chart below to see past signals as well as the current divergence between the two). Despite a possible upcoming correction, I still believe the markets will make higher highs after this correction, as long as there is QE3.
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