The US Dollar rally, combined with the ECB’s policies and the Fed’s hint at raising rates in December, is at risk of blowing up a $9 trillion carry trade.

When the Fed cut interest rates to zero in 2008, it flooded the system with US Dollars. The US Dollar is the reserve currency of the world. NO matter what country you’re in (with few exceptions) you can borrow in US Dollars.

And if you can borrow in US Dollars at 0.25%... and put that money into anything yielding more… you could make a killing.

A hedge fund in Hong Kong could borrow $100 million, pay just $250,000 in interest and plow that money into Brazilian Reals which yielded 11%... locking in a $9.75 million return.

This was the strictly financial side of things. On the economics side, Governments both sovereign and local borrowed in US Dollars around the globe to fund various infrastructure and municipal projects.

Simply put, the US Government was practically giving money away and the world took notice, borrowing Dollars at a record pace. Today, the global carry trade (meaning money borrowed in US Dollars and invested in other assets) stands at over $9 TRILLION (larger than the economy of France and Brazil combined).

This worked while the US Dollar was holding steady. But in the summer of last year (2014), the US Dollar began to breakout of a multi-year wedge pattern:

Why does this matter?

Because the minute the US Dollar began to rally aggressively, the global US Dollar carry trade began to blow up. It is not coincidental that oil commodities, and emerging market stocks took a dive almost immediately after this process began.

The below chart shows an inverted US Dollar chart (so when the US Dollar rallies, the chart falls), Brazil’s stock market (blue line), Commodities in general (red line) and Oil (green line). As you can see, as soon as the US Dollar began to rally, it triggered an implosion in “risk on” assets.

This process is not over, not by a long shot. As anyone who invested during the Peso crisis or Asian crisis can tell you, when carry trades blow up, the volatility can be EXTREME.

Indeed, the US Dollar as broken out of a MASSIVE falling wedge pattern that predicts a multi-year bull market.

The market drop in August triggered by China devaluing the Yuan (another victim of the US Dollar bull market) was just the start. Once the US Dollar rally really begins picking up steam, we could very well see a crash.

A few days ago we explained just how the dramatic divergence between the broader market and the number of stocks which are actually up and leading this rally has become, when we showed a chart of the NYSE advance/decline line overlaid on the S&P500.

The simple explanation of the above is that there are fewer and fewer stocks propelling the market higher.  In fact, as we showed yesterday, if one removes just 8 stocks, AMZN, NFLX, FB, GOOG, NKE, ORLY, SBUX and HD, the S&P500 would be the red for the year.

Today, BofA's new chief technician Stephen Suttmeier picks up on this dramatic divergence and gives out the following warning: "A month-long bearish divergence for the US 15 most active advance-decline line has the potential to limit S&P 500 upside." His details:

The weekly global A-D line of 73 country indices in US Dollars peaked on September 5, 2014 vs. a May 15 peak for the weekly closing price of the MSCI ACWI Index, which is also based in US Dollars. The rise in the US Dollar has had a bearish impact on global equity market breadth (many equity markets have done much better in local currencies) and this A-D line has not confirmed the global equity market rally. This is a major bearish breadth divergence and a classic sign of diminishing breadth for global equity market indices.

Suttmeier then warns what our readers are already aware of, however extended to the global market, namely that there now exists "a major bearish divergence for global A-D line in US Dollars"

The weekly global A-D line of 73 country indices in US Dollars peaked on September 5, 2014 vs. a May 15 peak for the weekly closing price of the MSCI ACWI Index, which is also based in US Dollars. The rise in the US Dollar has had a bearish impact on global equity market breadth (many equity markets have done much better in local currencies) and this A-D line has not confirmed the global equity market rally. This is a major bearish breadth divergence and a classic sign of diminishing breadth for global equity market indices.

Most importantly, it appears that historically changes in the A-D line have been a useful advance indicator of major market breakdowns. To wit:

Watch big support on the most active A-D line

Big breakdowns in the most active A-D line preceded or coincided with big breakdowns for the S&P 500 in 2000 and 2007. The key for the US equity market in late 2015 and into early 2016 is for the most active A-D line to hold its support at the August, July, and December 2014 lows. A failure to do so would put in a top for this advance-decline line and increase the risk for a deeper US equity market pullback.

Which means that the central banks, whose only mandate is to keep the global market from crashing, will have to buy - either directly like the SNB and BOJ or indirectly/spoof like the NY Fed via Citadel - much more than just the E-mini and a handful of stocks to give the impression that the market is healthy when in fact, it is not.

Whether they can pull this off will determine if the Fed's long telegraphed "rate hike" is executed, or if come December 16 Yellen chickens out one more time, and the next thing the market will have to look forward to is the inevitable arrival of negative interest rates.

While FANG (Facebook, Amazon, Netflix, Google) has become ubiquitous among the retail investing public still 'trading stocks', now it is time to meet NOSH (Nike, O'Reilly, Starbucks, Home Depot). The reason is simple -without these 8 stocks, the S&P 500 would be down year-to-date... "solid foundation" for the next leg in the bull market? Or teetering inverted pyramid scheme?

Finally, we couldn't help but notice that this list of 8 stocks is basically all the names that Jim Cramer is jamming down retail investors' throats (and thus hedge fund momo chasers) as the only stocks "that work." Such 'weak' hands do not bode well if this whole ponzi scheme turns down once again.

Chart: Goldman Sachs

Equal-weighted Consumer Discretionary v $XLY has been in Virtual Free-Fall of late, Lowest since 2009 $RCD/$XLY

The Equal-weighted Version of Consumer Discretionary, HOWEVER, is much more Telling.. Far beneath prior highs $RCD