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Watch This Chart, Things Could Get Crazy



September 15, 2011 – Comments (0) | RELATED TICKERS: UDN , SCCO , FCX

This morning, the central bankers of the world have staged a coordinated effort to provide U.S. Dollar liquidity. In other words, the central banks will try to crush the U.S. Dollar in order to inflate the stock market higher. Traders must continue to watch a chart of the U.S. Dollar Index very closely. Over the past three trading sessions the U.S. Dollar Index has declined sharply causing the stock markets to inflate and stage a three day rally. Simply put, the U.S. Dollar Index is trading in an inverse lockstep relationship to the U.S. Dollar.

This news tells us all how bad things really are economically around the world. We all knew that Europe was a mess, however, the central bankers actions today are telling us that things could be as serious as they were in 2008. If the U.S. Dollar Index begins to rally today traders should be prepared for some serious stock market declines. Many traders and investors have lost a lot of faith in the central banks since the markets have plummeted after the Federal Reserve ended it's $600 billion QE-2 program in late June 2011. It seems that the stock markets can only move higher when the U.S. Dollar Index declines. Until this inverse relationship proves to us that it has ended continue to watch the U.S. Dollar Index very closely.

Some stocks that will usually trade higher if the U.S. Dollar Index declines are Southern Copper Corp(NYSE:SCCO), Freeport McMoRan Inc(NYSE:FCX), ConocoPhillips(NYSE:COP), and United States Steel Corp(NYSE:X). If and should the U.S. Dollar Index rally throughout the trading day these stocks will most likely decline sharply.

Nicholas Santiago

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