This morning, the major stock market indexes are pulling back slightly. The pullback in the stock market indexes come as the U.S. Dollar Index begins the morning trading higher. Often, when the U.S. Dollar Index starts the day higher before the opening bell, it will fade throughout the trading session. Should the U.S. Dollar Index decline during the trading session the major stock indexes will usually inflate and trade higher. If you simply look at a daily chart of the U.S. Dollar Index you can easily see that that the major stock indexes will trade inverse to the major stock indexes. Last week, the stock market rally was on the back of the declining U.S. Dollar Index.
Traders should watch leading commodity and energy stocks to move higher if the the U.S. Dollar Index declines intra-day. Stocks such as Exxon Mobil Corp.(NYSE:XOM), Cliffs Natural Resources Inc.(NYSE:CLF), and Freeport McMoRan Copper & Gold Inc.(NYSE:FCX) will often react quickly to the upside when the U.S. Dollar Index declines. On the flip side, should the U.S. Dollar Index rally higher throughout the day these same stocks will usually decline quickly.
This stock market is really just one big currency trade. The U.S. Dollar Index is still the most important chart in the market at this time.