Tuesday, December 15, 2009

Stocks And The Dollar

Above is a chart of the S&P500 along with the U.S. Dollar and as you can see there has been a strong negative correlation between these two markets. As the Dollar sells off stocks tend to rise and when the dollar moves higher stocks tend to sell off.

Over the past 2 weeks the dollar has been moving higher but the S&P has not sold off as of yet. Being that I am short the stock market, I am naturally disappointed that stocks have not moved lower. It is quite possible that the relationship between the dollar and stocks are beginning to decouple. I am still expecting the U.S. Dollar to continue to rally and for stocks to sell off. We'll see how things unfold.


Anonymous said...

How do you see the dollar acting regarding USO ?

Kevin said...

A rising dollar is bearish for oil and commodities. Crude oil has been selling off recently so it is moving in line with what the dollar is doing.

Quality Stocks said...

The S&P will catch up with the dollar.

Anonymous said...

and what about natural gas? is it moving up due to the Exxon deal or is it not connected to oil?...thinking here of UNG and GAZ (two ETFs you've mentioned here before)

Kevin said...

I was a week too early buying natural gas and took the trade off. Obviously I messed this trade up.

Anonymous said...

thanks...i guess you feel this is still a good trade if there's a dip or do you think the target on UNG will be up a few bucks or more and a good trade even w/out a dip? seems it could go to the bottom of the gap at $10.95 or so without too much trouble...another gap begins at $14.01...may be significant resistance at $12.03 as well. Do you agree with this assessment?

Anonymous said...

back on-topic concerning S&P and USD; do you think OE is holding up some stocks while the typical stock action for OE is wrapped up? perhaps the sell-off you're looking for will commence in earnest by Monday, if not sooner. While USD is gaining vs Euro...it is not against the MXN Peso...not sure why that is and it surprises me.

ben said...

The best scenerio is that the S&P
will have a "santa clause rally"
for the reminder of the year as
most traders expect and then
this false start will take out
the reminder of the shorts and
then start correction in January/February period. Remember,
the next wave of mortgage interest rate reset won't start until the middle of next year. There is a lot of debts mature in 2011 and the market will show its ugly face before that.


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