Rally In Stocks Means Weaker U.S. Dollar Index

This morning, the important U.S. Dollar Index futures (DX Z1) are declining sharply lower by 0.88 cents to $78.18 per contract. When the U.S. Dollar Index declines the major stock market indexes will inflate and trade higher. Yesterday afternoon the U.S. Dollar Index dropped as there was news reported that the European Union will implement a massive bailout plan. Whether or not this news is true when the DXY declines the stock markets will inflate. Should by chance the U.S. Dollar Index begin to inflate or trade higher the major stock indexes could pullback or sell off from the morning highs.

As you may already know, most commodity and energy stocks will usually be the first to trade higher when the DXY declines. Stocks and ETF’s such as Cliffs Natural Resources Inc (NYSE:CLF), United States Oil Fund (NYSE:USO), United States Gasoline Fund (NYSE:UGA), and the iPath DJ-UBS Copper TR Sub-Index ETN (NYSE:JJC) are all trading higher ahead of the opening bell. It is important to understand that most energy and commodity stocks where extremely oversold, therefore, it is not surprising to see a bounce in the commodity complex. Traders must be aware, if the U.S. Dollar Index rallies or catches a bid higher the commodity and energy stocks could begin to pullback and sell off.

About Nicholas Santiago 576 Articles

Affiliation: InTheMoneyStocks.com

Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets.

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