The US Dollar, Japanese Yen and Volatility Spell Trouble

The US dollar (USD) looks set to break out explosively... only the direction remains uncertain. A break UP is BAD for equities. A break DOWN, is GOOD. A strong bid in the dollar would mean money is scrambling to get into the safest assets. (Strangely that really still is treasuries.)

Also, watch the Japanese Yen (XJY). A strong Yen represents financial stress and is BAD for equities. (Now that the Carry Trade has been unwound, the Yen is acting as a safe haven... yeah... I know. WTF eh?)

Strength in the USD and XJY combined with the refusal of volatility (VIX) to come down further is a bad sign for risky assets.

With the S&P 500 now precariously balanced at the bottom the trading range and the largest single component poised to break down, things are set for another leg lower.