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inthemoneystock (< 20)

Waiting To Exhale



July 22, 2011 – Comments (1) | RELATED TICKERS: XOM , CVX , CLF

Once again, as soon as the U.S. Dollar Index futures begin to trade higher the major stock indexes deflate and retreat quickly. This inverse relationship between the U.S. Dollar Index and the major stock indexes has been going over for about 10 years now. From time to time, the inverse correlation will break apart, however, that rarely occurs. This morning, traders can clearly see in chart below at how the up ticking U.S. Dollar Index will send the major stock indexes lower. The U.S. Dollar index is still one of the most important charts that any trader can follow.

Traders and investors should watch the commodity and energy stocks to come under pressure when the U.S. Dollar Index trades higher. Leading energy stocks such as Exxon Mobil Corp.(NYSE:XOM), and Chevron Corp.(NYSE:CVX) will usually trade lower on the back of a strong U.S. Dollar Index. Leading commodity stocks such as Cliffs Natural Resources Inc.(NYSE:CLF), and Freeport McMoRan Inc.(NYSE:FCX) will usually decline lower when the U.S. Dollar Index rallies higher. It is important to note, these same stocks will generally rally higher as soon as the U.S. Dollar Index pulls back or declines. These days, traders that are long simply have to hold their breath that the U.S. Dollar Index will fall in order for the stock market indexes to inflate and trade higher.

Nicholas Santiago

1 Comments – Post Your Own

#1) On July 22, 2011 at 11:23 AM, 123spot (< 20) wrote:

Nicholas, once this debt ceiling deal is done (presumably next week), do you expect a hard rally in the dollar? Is this debate holding the dollar hostage? I'm thinking it may be a "buy the rumor, sell the news" day sometime very soon. Brief news of a possible deal this week drove the markets straight up, but won't that reverse if the dollar is strengthened by an austerity/ debt ceiling raise? TIA-------I always read your blog and appreciate your work and sharing.

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