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Is This the S&P 500 Capitulation and When Will Yen Crosses Follow?

Is This the S&P 500 Capitulation and When Will Yen Crosses Follow?

John Kicklighter, Chief Strategist

Talking Points:

• The S&P 500 suffered its worst daily slump in 18 months crashing through a major technical reversal pattern

• A drop from the most stubborn 'risk' metric signals a more systemic speculative unwind is dangerously close

• When will the US Dollar act like a safe haven and the Yen crosses unwind as

carry deflate?

See volume behind the majors during the GDP and FOMC rate decision to gauge your trading approach using the free FXCM Real Volume and Transactions indicators.

There have been various signs over the past months that have suggested risk appetite was slowly eroding. This past session, the fear wasn't so subtle. The S&P 500 - one of the most successful holdouts of the central bank liquidity pump era - suffered its biggest drop in a year-and-a-half. This drop broke the floor on an eight-month reversal pattern, it unfolded despite a lack of high profile catalysts like headlines, and it caught fire even though we are in the period generally associated to the 'Summer Lull'. This does not necessarily mark the definitive shift in global investor sentiment, but it is a remarkably strong signal. We look at what is unfolding in the market, the catalysts and the opportunities should deeper fundamental channels develop in today's Trading Video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.