Kiss of Death for the S&P 500?
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On March 29th a "Power of the Pattern" indicator suggested that the S&P 500 would fall at least 7% in value (see post here). This indicator is the Australian Dollar/U.S. Dollar ratio. When it breaks support, the 500 index often follows. The last three times this index broke support the 500 index fell 8% twice and 15% once. See the link above for past S&P 500 declines.
Some call it the Magazine cover indicator. When a major news magazine makes a bold prediction about the stock market, stocks often head in the opposite direction. Look what "Newsweek" published in the past week.
Newsweek magazine published a bullish cover about the U.S. economy as the 500 index and the AUD$/US$ ratio are simultaneously breaking support. Is this a "Double Kiss of Death" for the 500 index? When it comes to portfolio construction, the currency/500 breakdown and magazine cover both suggest protecting risk assets!
(c) Kimble Charting Solutions blog.kimblechartingsolutions.com
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