Pick Your Poison
In order for the stock market to rally or trade higher the U.S. Dollar Index has to decline. This has been proven repeatedly over the past ten years. Traders can simply look at an intra-day chart of the U.S. Dollar Index and see how quickly the SPDR Dow Jones Industrial Average (NYSE:DIA) will deflate and trade lower as soon as the U.S. Dollar Index catches a bid higher. This afternoon, the Dow Jones Industrial Average (DJIA) was trading higher by more than 300.0 points, as soon as the U.S. Dollar Index found a low intra-day the DJIA dropped by more than 100.00 points in thirty minutes to curb the intra-day gains.
It is still rather amazing how investors get so excited about a rising stock market when the U.S. Dollar Index drops or declines lower. A weaker U.S. Dollar Index is a direct tax on the U.S. people. The dollar will buy less goods and services as it becomes diluted. The price of gasoline, heating oil, food, commodities, and almost everything else that people need to survive will become more expensive. The politicians talk about strong U.S. Dollar policy, however, the dollar has been weak since topping out in 2001 at $120.00 per contract. This decline in the U.S. Dollar Index coincided with the tech bubble. Today, the U.S. Dollar Index trades at $77.70 per contract which is about a 36.0 percent decline from the 2001 high. So there you have it, if you want a strong stock market it will come at the cost of a weaker U.S. Dollar Index.