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The Master Of The Markets



September 26, 2011 – Comments (0) | RELATED TICKERS: FCX , AKS , COP

This morning, the major stock market indexes are starting the day higher in anticipation of another European Union bailout. There are rumors and news reports out there saying that the European bailout fund will be increased, other reports say that Greece will remain in the European Union. The truth is that nobody really knows what is really going on in Europe. What traders do know is that the U.S. Dollar Index (DXY) will usually trade inverse to the major stock indexes. When the DXY trades higher or rallies the major stock indexes will deflate and decline lower. The opposite is true when the DXY declines or sells off, the major stock indexes will inflate and trade higher. Since the opening bell rang this morning, the U.S. Dollar Index has rallied off of the morning lows. This bounce in the U.S. Dollar Index has caused the major stock indexes to deflate from the pre-market highs already.

Traders and investors should remember that the commodity and energy stocks will usually be the first group of stocks that will react to the U.S. Dollar Index. When the U.S. Dollar Index declines or pulls back traders should watch for stocks such as ConocoPhillips (NYSE:COP), Freeport McMoRan Copper & Gold Inc (NYSE:FCX), BHP Billiton Ltd (NYSE:BHP), and AK Steel Holdings Corp (NYSE:AKS) to catch a bid and trade higher. These same leading stocks will usually decline and sell off on any strength in the U.S. Dollar Index.

The U.S. Dollar Index futures (DX Z1) are trading lower by 0.22 cents to $79.00 per contract. Traders should watch for short term intra-day resistance on the DX futures around the $$79.17 and $79.27 levels. The action in the U.S. Dollar Index is truly the master of these markets.

Nicholas Santiago

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