The fate of the US stock market rests on the USD/JPY chart above. When the yen weakens, the USD/JPY pair moves higher and US stocks move higher. When the yen strengthens, USD/JPY moves lower and US stocks move lower.
The US stock market is displaying rampant complacency, fearlessness and euphoria not seen for nearly six years. Market tops occur on rampant complacency. However, the potential top is named the Godot Top since the Fed and other global central bankers keep printing money to continually prop-up the stock market (to protect the wealthy class that own large stock portfolios).
The stock market top will occur when the yen begins strengthening and the dollar/yen pair will be correspondingly drifting lower. The blue symmetrical triangle is a thing of beauty stretching over five long years. 2020 is going to be an epic year in the stock market.
Typically, a fake-out move will occur from a sideways triangle and then price will return inside and truly breakout in the opposite direction. But the chart does not show any fake-out moves. Perhaps late 2018 right when the Q4 2018 stock market crash began. USD/JPY tried to breakout higher back then but was spanked down and kept inside the triangle (which opens the door to a possible failure ahead).
The upcoming move will be historic. And we do not have to wait long. The apex of the triangle is only a few more months at most so dollar/yen has to make a decision on who's bed it wants to sleep in for probably a couple years or more ahead; the bull's or the bear's.
The vertical side of the triangle is 28 handles. Thus, if dollar/yen breaks out to the upside above 110 it will target 138 and the stock market will be printing record highs week after week ahead. Fed Chairman Powell and BOJ Governor Kuroda will be given a ticker-tape parade down Wall Street with shredded money serving as confetti.
If USD/JPY breaks down from 107, that targets 79 and no one will be laughing, except short-sellers of course. Watch dollar/yen. If you are bullish the stock market, you want to see 110+ and you can brag at the office water cooler that you are the next Jesse Livermore.
If you are bearish the stock market, you want to see the dollar/yen lose the 109 level, which is the 50-week MA support, and then it would be lights-out if the 107 was lost. Market mayhem and carnage will appear with folks proclaiming that Armageddon has arrived.
The inside blue vertical line is 20 handles which would target 130 on the upside and 87 on the downside. Sometimes price may only want to venture to those targets rather than the maximum targets indicated by the outer vertical line. The plot thickens. Watch your wallet. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added Tuesday Morning, 12/31/19, at 7:45 AM EST: US stocks sink lower in the Monday session. The dollar/yen pair is trading at 108.53, a 108-handle. USD/JPY loses the 50-week support, which now becomes resistance, and price sets its eyes on the 200-day MA support at 108.75, which now also fails and becomes overhead resistance. As mentioned above, if 107 is lost, it is lights-out time.
Note Added Wednesday Morning, 1/1/20: Happy New Year. Dollar/yen 108.60.
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