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Markets Rally Again, Here Is One Reason Why



October 24, 2011 – Comments (0) | RELATED TICKERS: UDN , JPM , MS

This morning, the major stock indexes are trading higher continuing the gains from last week. The catalyst for the move higher in the stock market is once again the declining U.S. Dollar Index futures (DX Z1). Since the opening bell the DXY has sold off sharply. Traders should know by now, once the U.S. Dollar Index (DXY) declines the major stock indexes will inflate and trade higher and vice versa.

It seems that everything will inflate and trade higher with a weaker U.S. Dollar Index, it is not just commodities anymore. These days the leading financial and technology stocks seem to be trading in an inverse lockstep relationship to the U.S. Dollar Index. Leading financial stocks such as J.P. Morgan Chase & Co (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS), and Morgan Stanley (NYSE:MS) are all trading higher on the session.

Traders should be on alert if the U.S. Dollar Index begins to trade higher, stocks may pullback or begin to consolidate on any strength in the DXY. Right now, almost every leading stock sector is trading inverse to the U.S. Dollar Index. There is still a fair amount of intra-day support on the U.S. Dollar Index futures (DX Z1) around the $76.40 area.

Nicholas Santiago

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