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The U.S. Dollar Index Still Dominates Every Market Move



September 21, 2011 – Comments (0) | RELATED TICKERS: AAPL , FCX , ANRZQ

Traders and investors can look anywhere they want to find out what moves this stock market higher. Some traders are looking at lower bond yields for market guidance, others are looking at the leading stocks Such as Apple Inc. (NASDAQ:AAPL) to see where the markets are headed. The truth of the matter is that the markets are simply moving inverse to the U.S. Dollar Index. Traders can look the chart of the U.S. Dollar Index futures (DX Z1) and easily see the inverse relationship between the dollar and the major stock market indexes. This relationship did not begin today or this week, it has been in place way for ten years. If it is not broke don't fix it. Sure, there are times when the markets will not trade inverse to the U.S. Dollar Index, however, that will usually happen when the stock markets have extremely light volume. For example, around the Christmas and New Years holidays when the trading volume is extremely light and there are simply no sellers the U.S. Dollar Index will have little effect on the markets. Other then that time the U.S. Dollar Index will trade inverse to the major stock indexes.

Traders can watch for leading commodity and energy stocks to pullback and sell off when the U.S. Dollar Index moves higher. The opposite is true when the U.S. Dollar Index declines, the leading commodity and energy stocks will usually inflate and trade higher. This morning, the U.S. Dollar Index futures are trading higher by 0.20 cents to $77.72 per contract and the many leading commodity stocks are selling off at the start of the day. Stocks such as Freeport McMoRan Copper & Gold Inc. (NYSE:FCX), Alpha Natural Resources Inc. (NYSE:ANR), and Cliffs Natural Resources Inc. (NYSE:CLF) are all trading lower to start the session. If the U.S. Dollar Index declines at some point this morning traders can look for these stocks to catch a bid along with the major stock indexes. Simply put, it is the action in the U.S. Dollar Index that dominates every market move.

Nicholas Santiago

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