The action in the Japanese Yen appears to be repeating a pattern from January of this year. In December 2008, the Yen made a new high against the dollar, but then a lower high in January as the US markets posted new countertrend rally highs. The subsequent impulsive decline in the Yen coincided with the final leg down in the US markets.
Once again the Yen appears to be making a lower high as the US markets are making new rally highs. Is this pattern giving us a heads up that the rally in US markets is about to end? While there is no guarantee, as long the Yen remains below its October high, it would seem to suggest that is the case. In particular, however, if the Yen makes a new high, then the anticipated correction may not occur. There are other negative divergences still in force as well. The volatility indexes have not made new lows against the recent rally highs.
Unfortunately for the bears, today's action appears to have concluded a 3 wave pullback on the hourly charts, which means new rally highs. As long these divergences remain in place, I will be expecting a correction.
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