Rumblings Overseas

 | Mar 22, 2012 | 6:10 AM EDT  | Comments
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Once again, it is time to look overseas. I realize that we're now past the issues in Greece, so Europe feels calm -- and, even so, we all know it's still a big mess. Yet there were a few overseas moves in the markets Wednesday that bear some reviewing.

Late Wednesday I noted that the euro-yen currency pairing had seen quite a move. The action was probably more related to the yen than it was to the euro, since the latter didn't move so dramatically against the dollar. But when we see such a reversal -- and an outside reversal at that, where it's a higher high and then a lower low on the day -- I tend to take notice.

Euro-Yen Pairing -- Daily

While I suspect that uptrend line will be support the first time down, the fact that it had such a reversal of fortune Wednesday caught my eye. That's especially in light of the fact that there wasn't much volatility elsewhere!

Also, heck -- the dollar-yen cross almost looks like an exact replica of the Apple (AAPL) chart since late January, but it hasn't captured nearly the same amount of attention. While it didn't see an outside-reversal day as the euro-yen did, this is starting to look like a failure up at 84. Any break under 83 would confirm that it is time for a decent corrective move. I do believe it's coming sometime soon. My only hesitation is that the Japanese fiscal year ends March 31, so there might be some year-end maneuvers coming.

Dollar-Yen Pairing -- Daily

Turning back to Europe, some of the sovereign debt is again moving in euro-land. Spain is the most obvious example here, as the yields on its bonds are now back to the highs they've seen several times since the beginning of this year (noted with an arrow on the chart).

Yields -- Spanish Bonds

What's not as easy to see is that these yields actually crossed over that downtrend line. As a result, any follow-through to the upside would now be considered a minor change in trend from the decline we've seen since Thanksgiving.

Now let's take a look at the yields on French bonds. Much like Spain's yields, they have not scooted much higher -- but, curiously enough, they have broken that downtrend line, and you don't need a microscope to see it. I see 3% as being some very good resistance, since it was not until early February that yields closed below that level and left it behind. So if these yields got above 3%, we'd not only see the crossing of the downtrend line but also a move above resistance.

Yields -- French Bonds

So, while the U.S. equity markets have simply moved sideways since last week with very little volatility, we've started to see some volatility outside the U.S. -- in the European bond markets and in some currency pairings. I was always taught that the bonds are smarter than stocks. I don't know where currencies stand in that order, but these are clearly moves to which we need to pay attention.


 

Overbought/Oversold Oscillator -- NYSE

Overbought/Oversold Oscillator -- Nasdaq

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