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The U.S. Dollar Index Crumbles

|Includes: CLF, FCX, Southern Copper Corporation (SCCO), UDN, VALE
There are probably many traders out there that are tired of seeing me write about the U.S. Dollar Index, however, I simply can't seem to help myself. It still amazes me that the U.S. Dollar Index can get flushed almost every day. After all, is this not a European bailout that is scheduled to take place? Logically, the Euro currency should decline against the U.S. Dollar, however, the opposite effect is taking place at this time. This is exactly why we do not pay attention to the news and simply follow the charts. The chart of the U.S. Dollar Index since October 4, 2011 has been crushed sharply lower. This high in the U.S. Dollar Index chart has coincided with the recent stock market low made on October 4, 2011. Traders must keep an eye on the U.S. Dollar Index chart at all times. Every trade in the market is a trade on the U.S. Dollar Index.

The commodity stocks will usually be the first stocks to trade higher on the back of a weaker U.S. Dollar Index, however, energy, technology, financial stocks, and other sectors seem to be rallying just as quickly as the leading commodity names. This morning, stocks such as Freeport McMoRan Copper & Gold Inc (NYSE:FCX), Southern Copper Corp (NYSE:SCCO), Cliffs Natural Resources Inc (NYSE:CLF), and Vale SA (NYSE:VALE) are all trading sharply higher ahead of the opening bell. Traders must simply follow the U.S. Dollar Index throughout the trading session. As long as the U.S. Dollar Index continues to decline the major stock indexes will trade higher. On flip slid, if the U.S. Dollar Index strengthens throughout the day the major stock indexes will come under some selling pressure.

Nicholas Santiago