Dollar Dips, Market Rips

Over the weekend, we discussed the /ES futures trading at the bottom of the recent range and how a pop on Monday morning wouldn't come as a surprise. Well, we got a little more than a pop, but I wouldn't get too excited about this move just yet...

Besides the SPY being perched at the top of the selling on strength leaderboard, today's volume was pathetic compared to the recent declines. Additionally, prices only managed to rally up to one of my favorite spots to add to shorts and I'll likely do so on any weakness from here tomorrow...

The Nasdaq continues to be the relative strength laggard and prices remain well below the declining 5 dma...

The DOW appears to be the only index trying to etch out a bottom here and prices closed above all short term moving averages. The 5 dma also appears to be flattening out and it wouldn't take much strength to turn that average line back upward...

Click Any Chart To Enlarge

It's amazing what a little dip in the overbought dollar can do for the markets and commodities. This was nothing more than a minor dip compared to the recent thrust higher...

Chart Courtesy of http://stockcharts.com/

... yet commodities put in quite a performance today. Was this simply a bounce and some short covering in one of the weakest performing sectors of late or are those markets hinting that the dollar is getting ready to roll back over? I believe it's a little bit of both. I still think there's a bit more downside to come for the averages, but I wouldn't be surprised to see the dollar begin another leg lower soon and help to push the indices back towards prior highs.