The chart below clearly shows how the U.S. Dollar Index impacts the overall stock market indexes. Traders can clearly see when the U.S. Dollar Index futures (DX Z1) decline the S&P 500 Index e-mini futures (ES Z1) will inflate and trade higher. Just look at how the U.S. Dollar Index topped out exactly at 6:40 am EST, this is the exact time that the S&P 500 Index futures made their low.
The news coming out of the European Union is important, however, it is lagging and behind the curve. Often, by the time most traders hear about the news coming out of Europe the move in the U.S. Dollar Index and the stock market has already taken place. At this time, all traders need to know is when the U.S. Dollar Index declines the major stock market indexes will inflate and trade higher. The opposite is true when the U.S. Dollar Index rallies the major stock indexes will deflate and trade lower.
Some leading stocks that will trade inverse to U.S. Dollar Index are Cliffs Natural Resources Inc (NYSE:CLF), United States Gasoline Fund (NYSEARCA:UGA), Southern Copper Corp (NYSE:SCCO), and ConocoPhillips (NYSE:COP). These leading stocks will trade like yo-yos depending on the action in the U.S. Dollar Index.