When The Dollar Pops the Markets Drop
Once again, the major stock market indexes have given up the early pre-market gains. The decline in the futures market took place as soon as the U.S. Dollar Index began to trade higher. Traders and investors have seen this inverse relationship between the U.S. Dollar Index and the major stock market indexes over the past few years. If you watch a chart of the U.S. Dollar Index this morning, you will see that the stock market indexes simply decline lower as the U.S. Dollar Index rallies off of its morning lows. All traders must keep a close eye on the U.S. Dollar Index at all times.
Traders must remember that the most sensitive industry groups to the U.S. Dollar will be the energy and industrial metals sectors. Whenever the U.S. Dollar Index trades higher these industry groups will usually come under pressure. Traders should watch for leading stocks such as Chevron Corp.(NYSE:CVX), Southern Copper Corp.(NYSE:SCCO), and Nucor Corp.(NYSE:NUE) to all come under pressure if the U.S. Dollar Index continues to gain strength this morning. The opposite effect is likely to occur if the U.S. Dollar Index declined or pulled back at some point throughout the trading session. The U.S. Dollar Index chart should be followed by every trader at this time.