Below are a couple charts that are worth following to monitor the unwinding of the carry trade. This trade occurs when it is possible to have access to cheap capital from one part of the world and then borrow this capital and invest it in another part of the world at a higher rate-of-return than the borrowing cost. This has been done by borrowing money in Japan with low rates and investing it in places like New Zealand(pays high interest rates) and the United States.
This chart(click to enlarge) shows the Japanese Yen vs the U.S. Dollar. The red shaded areas show other areas where this carry trade was partially effected, but ultimately continued. Is this the ultimate unwind? It could be for a while.
This is a chart of the New Zealand Dollar / Japanese Yen. This shows the velocity of this unwind on a currency that seems to not offer the safety or liquidity of the U.S Dollar. It also helps that New Zealand central bank wants their currency much lower. The chart below shows the U.S.Dollar / New Zealand Dollar.
Watching these charts could give a key to where the selling in our market will slow. It doesn't seem to be today, as the overnight moves in these currencies were huge. When these currencies break, it effects the overnight futures and carries over again to the sentiment at the open. Below is a chart of the S&P 500 showing the levels established from the beginning of the year. Which level will hold? We are now below the opening range, so the next target is 1382.08.