The stock market is floating higher today on the back of a major drop in the Dollar. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is down sharply, trading at $22.89, -0.23 (-0.99%). A weak Dollar keeps the markets moving higher for multiple reasons. The Federal Reserve continues to create an artificial asset bubble to make the average American believe they are richer. While this bubble will burst, the Federal Reserve believes for the first time in history, they can control it. As the Dollar drops, stock prices must move higher to keep their real value. For instance, if the Dollar drops 10%, stock prices should move up 10%. In addition, a weak Dollar causes commodity prices like oil, gold, silver and copper to move higher. This also helps the profits of many stocks that are part of the S&P 500 and Dow Jones Industrial Average.
While the market is slightly higher on the day, it is interesting to note that we are not seeing major gains on a massive drop in the Dollar. This tells us that the key $125.25 level on the SPDR S&P 500 ETF (NYSE:SPY) is holding well as resistance. This level may cause a short term pull back in the markets and should be watched very closely.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
