Today the S&P 500, the NASDAQ, and the Dow Jones Industrial Average are all trading sharply higher along with the U.S. Dollar Index. This has been a very rare event lately to see the stock market indexes trade higher with the U.S. Dollar Index. Usually it has been the weak dollar that has been the catalyst for the stock market rally. Just look at the decline in the U.S. Dollar Index since the March 2009 stock market low. It is not difficult to see the inverse relationship between the dollar and the stock market. However, there have been times when the U.S. Dollar Index and the stock market indexes have rallied higher together. It happened in November and December of 2009 and again in March and April of 2010. This rare event usually takes place when the overall trading volume becomes extremely light. It also occurs when the U.S. Dollar Index starts the day out very strong and usually holds steady or fades throughout the trading session.
In summary, a strong U.S. Dollar Index should still be a negative for the stock market. However, at times the stock market and the U.S. Dollar Index can trade higher together, although, rarely will the relationship last. Remember a stronger U.S. Dollar Index will often deflate commodities and stock markets around the world so continue to monitor it closely. This morning the European markets were under some pressure and this would often be the cause for a move higher in the U.S. Dollar Index today.
