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The Decision Maker

The major market indexes all rallied last week into Friday's close. The SPDR Dow Jones Industrial Average closed just above the July 13th pivot high which was an important short term level resistance level. While many traders and investors are talking about the great earnings reports as being the driving force for the markets, most of our followers believe that it is the declining U.S. Dollar that inflates the major market indexes worldwide. This morning the U.S. Dollar Index is trading lower by 0.28 to $82.32. However, the major market indexes have seemed to stall out here at the open. Therefore, if the dollar begins to rally higher today it is possible that the major stock indexes will deflate.

FedEx Corp (NYSE:FDX) raised guidance today and this has certainly helped the stock indexes and the transportation index. The Ishares Dow Jones Transportation Index ETF (NYSE:IYT) is trading higher by 0.78 cents to $79.58. Last week United Parcel Service Inc (NYSE:UPS) released very positive earnings and guidance. Today the announcement by FedEx Corp confirmed that news, however, both stocks are now extended on the charts and look poised for a pullback. Therefore, it would not be surprising if this news has already been anticipated by the market and baked into the cake.

Monday's are usually the one of the lightest volume days of the trading week. Light volume will normally favor the upside. Hence the saying, never short a dull market. Therefore, it is possible that if the volume remains weak the market indexes could float higher. However, the U.S. Dollar must still be watched and followed closely as any bounce in the dollar may stall out these markets. The Dollar is the decision maker. We shall see.

Nicholas Santiago
Chief Market Strategist