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inthemoneystock (< 20)

Forget The European Ménage à trois Here Is The Reason For The Rally

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September 14, 2011 – Comments (6) | RELATED TICKERS: UDN , UUP , DDM

The major stock indexes have soared sharply higher this afternoon. The catalyst for the rally according to the media is the fact that Germany's Angela Merkel, France's Nicolas Sarkozy, and Greece's George Papandreou all agree that Greece should be part of the European Union. Greek bond yields are now favoring that Greece will eventually have to default, however, many investors are now speculating that Europe will introduce its own form of the bank bailout plan called TARP. While this news may be positive for Greece it is really not positive for the rest of the European Union. Spain, Italy, Portugal, Ireland, and even France may need to be bailed out. This TARP program will need to be very large if this is going to work for a while.

Today, the major stock indexes in the United States bottomed out around 10:20 am EST, this was the same exact time that the U.S. Dollar Index(DXY) topped out. Once the U.S. Dollar Index began to decline and sell off the stock markets started to soar higher. Nothing has changed over the past ten years, when the U.S. Dollar Index declines the stock markets inflate and trade higher. If you look at a chart of the U.S. Dollar Index you will see that the DXY is trading in an inverse lockstep relationship to the major stock indexes since the opening bell. Every trader should be watching the U.S. Dollar Index extremely closely at this time. Should the U.S. Dollar Index begin to rally or trade higher this stock market will likely decline very quickly. It is the U.S. Dollar that moves markets, not the news that is coming out of Europe.    

Nicholas Santiago
InTheMoneyStocks.com

6 Comments – Post Your Own

#1) On September 14, 2011 at 4:13 PM, TruffelPig (< 20) wrote:

Cramer always says look at $/Euro exchange rate - nothing new. But, this rate is obviously heavily influenced by the Europe drama and therefore you got it wrong. The news coming out of Europe moves the dollar and that the market.

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#2) On September 14, 2011 at 4:36 PM, jason2713 (< 20) wrote:

i was waiting for the short squeeze since Monday.  I think that has more to do with it than anything. 

Look at that joke of a close.  This isn't real buying, the markets are broken, and quickly are becoming a joke.  I'm on the sidelines and have been since April.  I'll scalp a few day trades, but I'm not going in heavy, and not holding anything over night, unless I'm hedged fully.

This is not investing.  HFT'ing machines are running the show.  Simple as that.

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#3) On September 14, 2011 at 4:58 PM, davejh23 (< 20) wrote:

"If you look at a chart of the U.S. Dollar Index you will see that the DXY is trading in an inverse lockstep relationship to the major stock indexes since the opening bell."

An indicator that truly trades "in an inverse lockstep relationship" to stocks is worthless.  Dollar moves don't lead inverse stock moves significantly, so any moves in the dollar aren't going to help you much.  Why don't you tell us how you benefit from an indicator that isn't leading?  It's like saying you can predict where the S&P is going by looking at an inverted chart of the S&P. 

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#4) On September 14, 2011 at 5:41 PM, prose976 (< 20) wrote:

Completely agree with Jason2713.  The markets are a joke.  if you really want a pretty decent comparison, Motley Fool Stock Advisor is up a paltry 13% since it's lows last month.  There is no rhyme, reason or logic, except that the headlines are doing their best to coax small fry into the next, and then, BAM!, the net closes and everyone gets fleeced except for the HTF systems.

It's not a theory or just personal, it's the new reality.  The markets no longer trade according to value based on anything that has been traditionally relied upon by individual investors.

Good luck to whoever thinks they can navigate the landmines and time it just right.  Right now, unless you're an insider or and HTF machine, you're in unchartered territory and definitely outgunned.

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#5) On September 14, 2011 at 7:44 PM, awallejr (79.57) wrote:

I agree with #2 and #4.  Until the SEC gains the guts to get a handle on this (HTF trading), the little guy is totally outgunned.

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#6) On September 14, 2011 at 8:02 PM, truthisntstupid (92.30) wrote:

Long-term investing still wins.

http://caps.fool.com/Blogs/rage-against-the-machines/625500

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