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Can The Greenback Fall Enough To Save The Markets



April 23, 2012 – Comments (1) | RELATED TICKERS: UUP , DIA , IWM

Nearly every trading session when the stock market is lower the U.S. Dollar Index is higher. Well, that is certainly the case once again today. This morning, the U.S. Dollar Index futures (DX-M2) are trading higher by 0.38 cents to $79.69 per contract. While 0.38 cents does not sound like much in the U.S. Dollar Index; it can move markets. If you are a trader that does not have a chart of the U.S. Dollar Index you can follow the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP) which will emulate the action in the U.S. Dollar.

Generally, most leading commodities such as oil, gold, copper, iron and other will trade inverse to the U.S. Dollar Index. These days most leading stock indexes including the NASDAQ Composite, and the Russel 2000 will trade inverse to the U.S. Dollar. Should the U.S. Dollar Index begin to decline traders should watch for indexes such as the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM), SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA), and the ProShares Ultra S&P500 (ETF) (NYSEARCA:SSO) to catch an intra-day bid off of the morning lows.

Nicholas Santiago

1 Comments – Post Your Own

#1) On April 23, 2012 at 2:12 PM, amassafortune (29.11) wrote:

The U.S. dollar is only falling due to overprinting and Bernanke's decision to allow liberal soverign debt currency conversion to help prop up the euro.

As with the recent history of Federal Reserve member banks, his actions have attached the U.S. as a joint and several partner to the insolvency of the EU in hopes that the yen, dollar, and euro will be too big to fail. 

Yes, the overprinting will continue, especially in an election year, which means all eyes will be on precious metals. Despite the moves to keep a lid on gold, if the price gets much above $1,700, it's a sign that the currency moves are not working and people are losing faith in fiat. 

I do expect stable U.S. companies to hold up pretty well. People are looking to preserve assets. If trust erodes in major currencies, and precious metals and commodities remain high, and real estate has not confirmed a bottom, stocks will still look good compared to currency that loses more value with each digital expansion of supply.

It's a shame, if the Fed had held maybe a 20% support level from the S&P 666 bottom of March, 2009 we may have entered a slow, sustainable recovery. Instead, ramping the market by over 100% in three years, accompanied by historic spending and expanding the money supply far in excess of the size of the economy, just created another bubble. That may be the new modus operandi for the Fed - always ramping something that member banks can invest in.

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