timwest

SPY getting ahead of itself relative to AUDUSD

FX:AUDUSD   Australian Dollar / U.S. Dollar
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7
This picture speaks a thousand words. JR's chart about the EURUSD relationship here at Tradinview inspired me to put this chart back into focus. I have published this relationship several times before, but given the extreme move of stocks relative to the AUDUSD lately, this begs some attention.

Which happens?

1. SPY sideways and AUD catches up?

2. SPY falls to get back in line with AUDUSD?

3. Both rise, but AUDUSD rallies more.

4. Both fall, with SPY falling further.
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Comments

Might want to include silver, gold, bonds in this mix. AUD and gold at one time had high correlation.
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timwest QuantitativeExhaustion
This one is my favorite just because of the tightness of the correlation over the past 4-5 years. I'm always looking for inter-market correlations to give me leading/lagging signals. I particularly like Crude Oil with a 3-6 month lead for the stock market.
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"Crude Oil with a 3-6 month lead for the stock market".. wouldn't mind seeing that chart and how it relates to gold.
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It looks like the AUD is having a nice move to play "catch up"... those who chose #1 are winning so far!
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what a correlation (until mid Jan)...!
I guess AUDUSD is hovering due to the weakening commodities and Gold ?
This chart is similar to me watching SPY/CRB and seems too obvious...

If it's so obvious, why is the market not reacting ?

The S&P is producing a leading diagonal triangle, which is usually warning ahead of a correction and this is accompanied with a negative divergence. Hence
I am expecting thinner air here already since a few days. Being short S&P and long AUDUSD is probably a good trade in either of your 4 cases.
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It looks like demand for AUD is diminishing. Surely last interest rate cuts, dovish RBA rhetoric and all that talk about possible earlier QE end have big impact on that widening gap. Personally i would be keen to sell AU on first signs of S&P sellout. Very interesting chart.
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