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Proprietary Strategies Reveal Truth: Forget Fiscal Cliff

ByNicholas Santiago
Published 11/29/2012, 12:18 AM
Updated 07/09/2023, 06:31 AM

Wednesday morning, the S&P 500 Index e-mini futures (ES-Z2) traded lower by 5.00 points to $1392.50 per contract. The stock markets seemed to be coming under pressure as the U.S. fiscal cliff uncertainty seemed to be taking hold again. There are also more problems brewing in the European Union. The latest chatter or rumor in the marketplace is that Italy will now need a bailout next year. Anytime the European markets come under pressure it will usually cause the U.S. Dollar Index futures (DX-Z2) to be stronger. When the U.S. Dollar Index strengthens the major stock indexes deflate and trade lower.

Traders should note that when the U.S. Dollar Index trades higher most leading commodities will be the first to trade lower. Leading commodity equities such as the Deutsche Bank AG DB Gold Double Long ETN (DGP), ProShares Ultra DJ-UBS Crude Oil (UCO), ProShares Ultra Silver (ETF) (AGQ), and the iPath DJ-UBS Softs Subindex Total Return SM Index ETN (NYSEARCA:JJS) will usually all come under selling pressure when the U.S. dollar rallies higher. These same equities will usually catch a bid and trade higher when the U.S. dollar declines. Traders that do not have a chart of the U.S. Dollar Index futures can follow the PowerShares DB US Dollar Index Bullish (UUP).

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