S&P 500 Breaking Down Keeps the “Risk Off” Trade Going
Last Monday I told you that either that week or the next week, the S&P 500 was likely to have a huge breakout one way or the other. You can see more about that post here.
Now we know which way the index has broke out so we know which trade has the biggest advantage between the “risk on” and “risk off” trade.
Now that the triangle on the S&P has broken southward, we know that the “risk-off” trade has a bit more to go.
The dollar is climbing greatly against the Aussie and New Zealand dollars. So those that have been short AUD/USD and NZD/USD as the S&P 500 broke down have benefited greatly.
Now you can see why I love chart patterns. Many people just saw a back-and-forth market and had no idea when it might end.
The triangle pattern coupled with Elliott Wave counts, shows us approximately when a “real” breakout is coming and gets us ready for it ahead of time. Being prepared and not being caught by surprise is half the battle.
According to the triangle pattern’s price projection that it gives…the S&P 500 will minimally drop down to the 1,160 area. Check it out below.
Knowing this, we know that the defensive currencies like the buck are likely to rule and reign for a bit longer and the riskier currencies like AUD and NZD will likely suffer a bit longer too.
So be sure to watch for patterns in the stock market…it can help tip you off to coming trades in the currency market.