By Nicholas Santiago on July 28th, 2010 3:18pm Eastern Time
Today the market is pulling back a little and has really been under pressure since the open. Many traders and investors are under the impression that the market weakness is because of the weak stocks such as Google Inc(NASDAQ:GOOG), and Amazon Com Inc (NASDAQ:AMZN), and Baidu Inc (NASDAQ:BIDU). However, it appears there is something bigger and more important at work today and it is the U.S. Dollar Index.
Today the U.S. Dollar index has rallied throughout the trading day. At 10:00 am EST the dollar traded as low as $81.95 and now it is trading at $$82.19. While this may not seem like a major move higher in the dollar it does carry a lot of weight in the currency world. Simply put when the dollar rallies the stock market indexes deflate. The opposite is true when the dollar declines the market indexes inflate. The U.S. Dollar is the real driving force behind every market move.
If you look at a weekly dollar chart you will see a major dollar decline in 2009 when the stock market rallied higher for most of the year. In 2010 the dollar has rallied higher into early June 2010. It is important to note that the major market indexes have been under pressure for most of the year. Sometimes the stock market does not react tick for tick inversely to the dollar, however, often it will.
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