By Gareth Soloway on September 27th, 2010 12:18pm Eastern Time
Whether this latest rally has been topped off by end of quarter window dressing or not, the markets have had a huge rally. With four straight weeks of gains, the stock market looks to add number five this week. While the move has been sensational, one warning sign that keeps popping up is oil. The S&P is up 10% for the month of September and the Nasdaq 100 is higher by 15%. Truly remarkable. If this gain in the markets is from the core of a true recovery, global and domestic, oil should be up approximately 10% as well, maybe even more considering the drop in the Dollar. After all, if a recovery is taking place, demand for oil should be jumping. Supply and demand would dictate oil should be higher. The United States Oil Fund LP (ETF) (NYSE:USO) made its low a month ago at $31.50. It is currently trading at $33.07. That is only a move higher of 5%, half of what the S&P 500 is up. In addition, the Dollar has been crushed over the last month. One month ago today, the PowerShares DB US Dollar Index Bullish (NYSE:UUP) was trading at $24.14. Today it is trading at $22.99. That is a drop of 4.75%. When you factor in the U.S. Dollars drop, oil is basically flat on this whole entire move higher in the S&P 500. Very fishy! This serves as a warning sign, nothing more. To get more analysis on this and more, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
By Nicholas Santiago on September 24th, 2010 11:50pm Eastern Time
Sometimes my own colleagues get tired of my rant about the U.S. Dollar Index. However, the dollar chart remains the most important chart in the market and has been for quite some time now. Nearly every morning I write about the U.S. Dollar Index which measures the performance of the U.S. Dollar against the Euro (57.6%), Yen (13.6%), British Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%), and the Swiss Franc (3.6%). Simply put when the U.S. Dollar Index is trading higher the stock markets in the United States and around the world simply decline or deflate. The opposite is true when the U.S. Dollar Index declines the global stock indexes will generally trade higher or inflate. Therefore, the U.S. Dollar Index chart is one of the most important charts in play right now.
The other important factor to remember about the U.S. Dollar is most commodities will trade in dollars. As you may already know commodities are very inflationary for this very reason. Therefore, stocks such as Southern Copper Corporation (USA) (NYSE:SCCO), and AK Steel Holding Corporation (NYSE:AKS) , will generally catch a bid when the U.S. Dollar Index declines or sells off. Often oil and energy stocks will trade higher should the U.S. Dollar decline or trade lower. Oil also trades in U.S. Dollars and British Pound.
In a time when the U.S. Treasury and the Federal Reserve Bank are working very hard to inflate the markets back to health the U.S. Dollar Index holds most of the clues for major market moves. If you look at the stock market rally in 2009 it was in part caused by the decline in the U.S. Dollar Index. Please remember, U.S. consumers that are on fixed incomes feel the pain when the U.S. Dollar Index declines. The U.S. Dollar will buy them less goods and the goods that they need to survive will increase in price. Therefore, while a weak dollar looks like a positive for the stock market it is a negative for the people. Keep a close eye on the dollar as it seems to be the only chart that matters at this time.
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