Investors are keeping an eye on a possible Fed rate hike in June and the continuous trickle of first-quarter earnings releases, but the short-term future of U.S. stocks could actually depend on a foreign currency.
On Wednesday, the Chinese yuan hit its lowest level against the U.S. dollar in five years. While U.S. stocks rose on the same day, Evercore ISI technical analyst Rich Ross believes the yuan's devaluation could also bring U.S. stocks down based on previous events within the past year.
"Whether we're talking about the U.S. dollar or the yuan, it's really just two different ways of looking at the same coin," he said on CNBC's "Trading Nation" on Wednesday. "Just look at that chart of the yuan, and it really is just a mirror image of the S&P 500 to a certain degree."
Ross points to two key time frames that reveal the yuan's more recent correlation with U.S. stocks. The first is a dip in August 2015, during which the yuan's devaluation caused what Ross terms a "flash crash" that sent the S&P 500 down 10 percent. The second took place a few months later in November when the devalued yuan corresponded with a weak start into the new year for U.S. stocks.
"The two peaks correspond with the bottoms in the equity market. So if you had nothing else, all you'd need is this chart to reinforce how important that yuan chart is," added Ross.
China has caused global markets a fair amount of anxiety in recent months. Growth has slowed and Chinese stocks have slid.
But analysts believe the ramifications extend way beyond Chinese borders, and the U.S. could be hit especially hard given how many multinational companies are now focused on Chinese consumers.
That is why Boris Schlossberg, managing director of FX strategy at BK Asset Management, is bearish about U.S. stocks despite the recent market uptrends.
"The great problem is that if the yuan needs to be revalued, that will wreak havoc with U.S. multinationals that now have big exposure to China, with Apple likely hit the hardest," he wrote to CNBC. "So yes, l think while things are relatively calm, the markets are definitely getting nervous."
According to Schlossberg, "the last thing Chinese authorities want to do is devalue, but they may face pressures beyond their control" that would tip the scales toward the yuan's devaluation.