This morning, the U.S. Dollar Index futures (DX Z1) are declining ahead of the opening bell. Whenever the U.S. Dollar Index declines the major stock indexes around the world will inflate and trade higher. If and when the U.S. Dollar Index rallies or trades higher the major stock indexes will deflate and trade lower. The bottom line, if this stock market is to trade higher the U.S. Dollar Index must weaken and trade lower. Essentially, every trade is a trade on the U.S. Dollar at this time. Until this inverse relationship between the dollar and the stock market begins to decouple this is really the only thing that traders need to focus on.
Should the U.S. Dollar Index decline further traders can watch for many of the leading commodity stocks to trade higher. Leading commodity stocks such as Southern Copper Corp (NYSE:SCCO), Freeport McMoRan Copper & Gold Inc (NYSE:FCX), Cliffs Natural Resources Inc (NYSE:CLF), and Vale SA (NYSE:VALE) are likely to trade higher on the back of a weaker dollar. These same stocks could come under selling pressure if the U.S. Dollar Index catches a bid and trades off of the morning lows.