This Indicator is Telling Us Everything About All Markets Right Now

Markets are noisy.

Sometimes they move up big… and sometimes they rise just a little.

It’s the same thing with down moves, too.

But regardless of direction, one thing is always true.

Markets are driven by how money flows through them.

In this country – and to a large degree, outside it as well – that means that we must pay constant attention to the relative strength of our money… The U.S. Dollar.

Because think about it… When we buy a stock, we pay for it in dollars.

And when we sell a stock, we receive dollars in return.

So, to some degree at least, it stands to reason that stock markets should move largely in the opposite direction that the dollar does.

Well guess what…

Source: Seawolf Research

Aside from last month when hedge fund performance problems dragged the whole market down, markets have mostly been negatively correlated with the U.S. dollar for the past six months.

And if you’re wondering what’s going on with this week’s sleepy, flattish, mega-cap-focused action, there are two bits of information you should probably know.

First, volume is WAY down relative to recent history.

Source: Seawolf Research

And the U.S. Dollar Index is retesting its highs from two weeks ago.

Source: Bloomberg

Now usually, when a stock, bond, commodity or currency breaks through highs, it tends to head higher.

But if it tries to retest highs and fails, it quite often reverts to its previous trend.

In this case right now, we have low volume in the market, because unlike me, much of Wall Street is currently vacationing at their mansions in the Hamptons gearing up for the long Independence Day weekend.

What that means is that there are fewer players of scale in the market right now, stocks go sideways, and the dollar rises.

But what do you think is going to happen on July 6 when they return to the office?

Check out that trend in the Dollar Index one more time…

Source: Bloomberg

That’s right, when those hedge fund laxbros all sit down at the desk after a week of tanning, grilling, and pounding Peroni on the beach, they’re going to buy the crap out of stonks.

And they’re going to sell dollars to do it.

Now let’s take a look one more time at that correlation table…

Source: Seawolf Research

When the dollar heads down like I’m suggesting here, then we very well may see declines in the mega-cap, tech-heavy Nasdaq 100, tracked by the Invesco QQQ Trust Series 1 (NYSEArca: QQQ)…

A modest gain in the S&P 500, tracked by the SPDR S&P 500 ETF Trust (NYSEArca: SPY)…

and an absolute rip in the small cap-heavy Russell 2000, tracked by the iShares Russell 2000 ETF (NYSEArca: IWM).

The Dollar is Moving More Than Just Those Markets

There’s one market, however, that the U.S. Dollar has really been pushing around of late, though.

And if you’re a longtime Venture Society reader, then it’s likely also one that’s of great interest to you.

Source: Seawolf Research

Precious metals — particularly gold — got absolutely smoked by the dollar’s rip from June 16 to 18.

Source: Bloomberg

So if we’re positioning for a USD pullback next week, we want to own the two things that go most in the opposite direction.

For us, that means another ¼ tranche in both ProShares Ultra Silver (NYSEArca: AGQ) and ProShares Ultra Gold (NYSEArca: UGL).

Summer is often an unpredictable time for markets, so no guarantees here… The hedge fund laxbros have enough Peronis to stay on vacation for a while.

But for a week this hot, I figured all you subscribers should at least have a market take to match.

All the best,

Matt Warder