By Nicholas Santiago on May 17th, 2010 3:19pm Eastern Time
There is an old saying in the stock market; "a rising tide lifts all boats." These days that should be changed to "a falling dollar inflates all markets." Today is a perfect example of that new market saying playing out perfectly. The U.S. Dollar Index rallied at 9:30 am EST when the New York Stock Exchange opened causing stocks to decline as commodities deflated. Then the market seemed to find a low around 12:00 pm EST when the dollar made its intra-day high. Therefore, it is safe to say that the major market indexes are trading inverse to the dollar.
Today many major commodity names have caught strong bids off the low of the day. Stocks such as Cliffs Natural Resources Inc (NYSE:CLF), United States Steel Corp (NYSE:X), and Freeport McMoRan Copper & Gold (NYSE:FCX) have all bounced sharply off the intra-day lows. Remember, all commodities trade in U.S. Dollars, therefore, they will trade inverse the dollar.
Last night the dollar reached some short term resistance levels at $87.00. Until the dollar crosses above that level the dollar could have a short term pullback. Any pullback in the dollar should help lift and inflate the markets. As of now this would just be short term and nothing more. There has been a lot of recent technical damage done to the major stock indexes and that is not going to be repaired easily.
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