Want to know where stocks are going? Watch China

The yuan is serving as a key tell about where other assets are going, particularly since the Chinese currency suffered a sudden plunge in a swift depreciation in August, according to technical analyst Rich Ross of Evercore ISI.

For starters, the yuan drop presaged a similar-looking fall in U.S. equities.

"Yuan strength equals risk-on," meaning that it rises alongside risky assets like stocks, Ross said in a Monday "Trading Nation" segment. That's why the chart of CNY/USD (the inverse of how the currency pair is normally shown, so that it is the same chart flipped over) "looks just like the S&P 500."

The comparison also works in the near term, as the yuan recently rose as China announced stimulus, just as the S&P has been rising. In fact, Ross reports that both charts have broken their 50-day moving averages.

Since the inverse yuan chart looks like the S&P 500, it is no surprise that USD/CNY looks just like the chart of the CBOE Volatility Index, or the VIX, which generally records market fear.

Read MoreRecord redemptions for offshore yuan debt as China opens onshore door wider

Since the yuan is a proxy for "risk-on" moves, it also should not be shocking that the chart of the yuan looks a good deal like the chart of crude oil.

"I think that this trend towards dollar weakness, yuan strength — that provides bullish implications for crude and risk factors all across the world!" Ross proclaimed.

The broad yuan read-through "makes a lot of sense in the sense that you think that the most important thing in the world right now is the Chinese economy. And if the yuan is a reflection of the strength or weakness in the Chinese economy, then of course all these things correlated make quite a lot of sense," said Boris Schlossberg, director of FX strategy with BK Asset Management, on "Trading Nation."

But more broadly, Schlossberg said that "we're now in a market where completely global factors matter to local markets, and I think that's a key takeaway that everyone should be paying attention to as well."


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more