Worried about stocks? Keep an eye on the yen

Despite the Bank of Japan’s herculean efforts, the Japanese yen continues to flex its muscle. The question is whether the currency is about to kick sand in the face of the U.S. stock market.

That is because a strong yen has a history of bullying stock-market bulls, says chart watcher Chris Kimble of Kimble Charting Solutions. In an early Wednesday note, he pointed to a potential head-and-shoulders topping pattern (see chart below) for the dollar/yen pair USDJPY, -0.80% which would be confirmed if it falls through the “neckline” at the 115-to-114 yen level—an area that was subsequently breached. A head-and-shoulders formation is a chart pattern that is typically viewed as a bearish sign, among technical analysts.

Kimble and other chart watchers have previously flagged the yen’s inverse relationship with the Nikkei NIK, -2.31%  stock index as well as global equities, including the S&P 500 SPX, -0.02%

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