Stock and Currency Market Triangle Price Patterns Pending Breakouts

By: John_Hampson

Stock indices in Asia and major currency pairs are closing in on the conclusions of large triangles that have been in formation since around 2008. 

Shanghai Composite:

Source: Yahoo Finance

Nikkei:

Australian index:

Are these indices lagging the West and about to break out upwards? Or have Western indices begun a topping process which will be accompanied by a breakdown in Eastern indices?

We see a similar formation behind the scenes of the S&P500 action, looking at market breadth:

Source: Astrocycle / Stockcharts

The Mclellan oscillator typically produces a positive or negative divergence ahead of a move in the stock market. It has been teasing us for some time by narrowing in its range, and it has been one indicator diverging from the rally. Keep an eye on it for a lead move, particularly downwards.

Turning to the major currency pairs, and relations between USD, GBP and Euro:

Euro / GBP:

Euro / USD:

GBP / USD:

Breakout against the dollar? Is the big move coming to be a breakdown of the US dollar, associated with a breakout for long term treasury yields and a big move up in gold?

Source: Yahoo Finance

Source: Gold Scents

In all the above scenarios, a safe strategy is to await a breakout, then a successful backtest of the breakout (to ensure it is not a fakeout), before trading in the direction of the breakout.

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