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The Inverse Relationship That You Should Know



August 17, 2011 – Comments (0) | RELATED TICKERS: UDN , FCX , CLF

Once again, the S&P 500 Index is trading inverse to the U.S. Dollar Index. Traders can clearly look at the chart below and see how the major stock indexes deflate as soon as the U.S. Dollar Index trades higher. While this inverse relationship has been intact for over ten years, it is even more correlated these days.

Traders must watch the leading commodity and energy stocks closely when the U.S. Dollar Index trades higher. These stocks are the most susceptible to a decline when the U.S. Dollar Index rallies. Stocks such as Freeport McMoRan Copper & Gold Inc.(NYSE:FCX), Chevron Corp.(NYSE:CVX), and Cliffs Natural Resources Inc.(NYSE:CLF) are a few leading stocks that can decline quickly when the U.S. Dollar Index trades higher. Traders can watch for intra-day resistance on the U.S. Dollar Index futures (DX U1) around the $73.85 and $74.00 levels.

Nicholas Santiago

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