Market crash scenarios, and correlation between AUDJPY and S&P500

For market observers, it is well known fact that AUDJPY and S&P500 have quite high correlation.

Here is the chart from Yahoo, and high correlation started somewhere around 2003 as far as my rough visual observation goes.

There is no guarantee it will be this way in the future, so we have to be careful in using this “temporary” fact.

The readers of this blog know that I’m very bearish AUDJPY. And in my experience, Elliott wave principle saved me from losing money even more than helping me to make money. Here is the recent example in gold market.

Elliott wave practitioner like Robert Prechter even go so far as to say,

The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.

I’m an ordinal being, and still (and probably never) convinced that the market crash will go down such a monster cliff that Ralph J. Acampora would describe as

I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over.

in the same New York Times article.

Still, I think my view is categorized into super bears compared to the median’s view.

I’m keeping the majority of my 401k and Roth IRA as the cash equivalent position until I change this view.

I had time to trace the A-B-C zigzag correction scenario to S&P500 chart with logarithmic scale. The bottom of C wave in this case points to 550:

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