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U.S. Dollar

June 9, 2010 – 4:51 pm

Starting yesterday and continuing this morning the dollar is falling against the Euro after making a very strong move up in May. The strength in the dollar started in December of last year. It is important because a stronger dollar changes imports and exports around the world and as the dollar strengthens it has been difficult for the stock market to maintain its bull market phase. This year during the two corrections, one in February and the current larger one, the dollar strengthened sharply. When the dollar moved sideways in March and April the stock market rallied. Once the dollar finds its new level, which should be soon, the market will start another rally.

Ben Bernanke has spoken as he gives his normal rounds of testimony to the Congress. He believes there will ‘not’ be a double dip recession, but rather a sustained weak recovery. That is confirmed by the economic evidence that has been building for some time. He is only stating the obvious at this point.

For us investors and traders it is more important to watch the movement of the dollar and of course that means the progress or lack thereof of Europe dealing with their problems. The U.S. dollar seems to be the bellwether for stock market activity. That of course will change someday, but for the time being that is the guide investors must watch.

Good Trading
Steve Peasley

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