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Forget Greece, Watch This Chart



June 28, 2011 – Comments (0)

This morning, the major stock market indexes are rallying higher. The move in the market looks to be broad based as every sector seems to be inflating higher. Many traders and investors are very concerned with the events taking place in Greece today. Greece is facing a 48 hour strike before the important austerity vote on Thursday. The protesting in Greece has turned violent and many traders are concerned that this violent action could escalate over the next two days. While all of these concerns are valid there seems to be only one thing that matters to the markets, the U.S. Dollar Index.

As traders we must simply understand that the major stock market indexes are trading inverse to the U.S. Dollar Index. This morning, the U.S. Dollar Index is trading lower and the major stock indexes are trading higher. The same type of action took place yesterday, the markets rallied and inflated higher as soon as the U.S. Dollar Index declined. Therefore, traders and investors must keep a close eye on the U.S. Dollar Index chart at all times. Should the U.S. Dollar Index rally higher off the morning lows the major stock indexes could deflate and trade lower. The U.S. Dollar Index is the only chart that really matters.

Oil, gold, gasoline, and silver are very sensitive to the U.S. Dollar Index at this time. Therefore, should the U.S. Dollar Index show some strength these commodities are likely to decline quickly. They have all been under pressure over the past couple of weeks when the U.S. Dollar Index has gained strength and should continue to be under pressure if the U.S. Dollar Index rallies further. On the flip side, if the U.S. Dollar Index continues to decline traders should look for strength in these commodities and the overall stock market indexes.

Nicholas Santiago

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