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The Chart Tells Us Everything



September 28, 2011 – Comments (0) | RELATED TICKERS: UUP , UDN , QLD

The major stock indexes continue to trade inverse to the U.S. Dollar Index. As soon as the opening bell rings at the New York Stock Exchange traders should simply follow a chart of the U.S. Dollar Index futures (DX Z1), or the PowerShares DB US Dollar Index Bullish (NYSE:UUP). When the U.S. Dollar Index dips the major stock indexes will inflate and trade higher. The opposite is true when the U.S. Dollar Index rallies or trade higher as the major stock indexes will usually decline and trade lower. Traders and investors must follow the U.S. Dollar Index chart at all times.

Most commodities and energy stocks will usually trade higher on a weaker U.S. Dollar. It is also important to note that the major stock indexes will also rally or inflate higher if the U.S. Dollar Index declines. Recently, the NASDAQ Composite has been the strongest major stock index in the market, therefore, if the U.S. Dollar Index declines traders can watch for a bounce in the tech heavy stock index. It is always important to remember that just about everything will deflate if and when the U.S. Dollar Index moves higher. Often this inverse relationship will trade inversely tick for tick throughout the trading day. The one time of the session that the U.S. Dollar Index will not have the same effect on the markets is when the trading volume is extremely light. Traders can see this by looking a chart of the SPDR S&P 500 Trust (NYSE:SPY) just prior to a major holiday.

Nicholas Santiago

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