This morning the U.S. Dollar Index is trading lower by 0.04 to $85.98. As we all know by now the dollar is the driving force in the market. When the dollar rises stocks simply deflate, and when the dollar declines stocks will simply inflate. This inverse relationship between the dollar and stocks has been very strong for quite a while. Until something changes and these two charts disconnect or decouple the dollar must be followed. As of late the stock market has still been weak regardless of the dollar. Therefore, the inverse dollar relationship with the stock market is reactionary and not proportional.
The ADP Employer Services report was looking for a gain of 60,000 private sector jobs and the report only showed a gain of 13,000. This was just more bearish economic news for the market, however, the market is holding up so far at the open. We shall see if the stock indexes can hold up throughout the session as every bounce higher is being sold recently.
Tesla Motors Inc (NASDAQ:TSLA) had a very successful IPO yesterday closing sharply higher than it's offering price. Today TSLA is trading higher by 1.27 to $25.18. This stock may need to consolidate yesterday's gain.
Spot crude is trading slightly lower to start the day at $75.82. The popular United States Oil Fund (NYSE:USO) is trading higher by 0.08 to $34.26. Should the dollar pullback oil may catch a bid higher. Other commodity names trading higher are United States Steel Corp (NYSE:X), and Cliffs Natural Resources (NYSE:CLF). Both of these names are extremely oversold on the daily charts and can be due for a bounce.
The bottom line is the movement of the U.S. Dollar. Should the dollar dip the stock market indexes will inflate and should the dollar rise the stock markets will inflate. Watch the dollar as it is still the most important chart out there.
Chief Market Strategist