Markets Drop Sharply As Dollar Bounces Off Support

The markets dropped sharply in the late morning session as the dollar bounced off the 200 moving average and started to move back up

. To understand this movement, it is important to grasp the inverse relationship between the markets and the dollar. During market hours, when the dollar falls, the markets move higher. Inversely, when the dollar rises during trading hours, the markets sell off. Just knowing this, helps explain the wild movements in the market today. View the PowerShares DB US Dollar Index Bullish (NYSE:UUP) chart below. This is the ETF that tracks the dollar.

The dollar gapped sharply lower today and inched towards the 200 moving average. This level has been discussed as being the key support line for the dollar and an inevitable target to hit prior to a major bounce. That hit has occurred today. No sooner did the dollar kiss the 200 moving average, it started to get a bid. Immediately, the markets began to roll over. As the UUP or dollar inched higher, the markets sold more and more, coming to a key support line of $109.85 on the SPDR S&P 500 ETF (NYSE:SPY). A small bounce has started at this level on the markets. However, the dollar as started to down tick as well.

The markets have held up nicely of late with earnings that came in generally good and a mix of positive signs out of Europe along with lighter summer volume. Volume today is not heavy by any stretch, but it has picked up on the selling pressure.

Exxon Mobil Corporation (NYSE:XOM) reported earnings that beat analysts estimates by $0.14 today. The stock initially traded higher but has since succumbed to the drop in the markets, turning negative as well. Chevron Corporation (NYSE:CVX) reports earnings tomorrow morning.

GDP will be reported tomorrow, that will be a major point of interest for the markets and should be watched closely. Estimates have dropped recently from four percent to around two percent.

Gareth Soloway

Chief Market Strategist

www.InTheMoneyStocks.com

Markets Drop Sharply As Dollar Bounces Off Support

By: Gareth Soloway

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