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Ground Hog Day

|Includes: SPY, The United States Oil ETF, LP (USO), XOM

Today's action is very similar to yesterday as the Dow Jones Industrial Average (NYSE:DIA), SPX 500 or the SPDR Trust (NYSE:SPY), NASDAQ (Nasdaq:QQQQ), and the Russell 2000 (NYSE:IWM) are all climbing higher. One could make a case that the same two supporting factors from yesterday are driving the markets higher. They are the weak U.S. Dollar and the poor or light volume in the market. Yesterday we discussed that when these two factors take place it has lead to a rally day in the markets. Today is no exception as this seems to be the recipe for a rally.

The U.S. Dollar index (NYSE:UUP) is trading lower again today. The DXY (U.S. Dollar index verses a basket of 6 major currencies) is lower by 0.26 cents to 78.98. Meanwhile, the Powershares U.S. Dollar index ETF (NYSE:UUP) is lower by 0.07 cents on the day. While these declining numbers don't sound like much these are sharp moves in the currency markets and directly effect the prices of commodities. Remember a weak dollar will help most inflationary stocks to inflate.

The second factor that supports the markets to the upside is the light volume. Often when there is light volume in the market it makes it difficult for short sellers. Hence the old market adage, "never short a dull market." Yesterday and today seem to be one of those days when the volume is light and the market is dull.

Who benefits from the combination of light volume and a weak dollar? Generally, most all stocks benefit from light volume. However, commodity and inflationary stocks usually benefit the most form a weak U.S. Dollar. On days like today the SPDR Gold Shares (NYSE:GLD), Ishares Silver Trust (NYSE:SLV), U.S. Oil Fund (NYSE:USO), and IPath Dow Jones UBS Copper Sub-Index (NYSE:ARCA) should all be in play. Remember every trade is a dollar trade so keep an eye on the dollar.

Nicholas Santiago
Chief Market Strategist