You may not have noticed today as a couple of financials led the markets lower but all four of the major averages have now triggered a buy signal. The Nasdaq Composite, The Dow Jones Industrials, The Russell 2000, and the Standard & Poors 500 are all signaling a rally has begun.

The Dollar and Oil

            The US Dollar is the main reason the market has picked up. A number of financials bottomed out during earnings season but the rally in the US Dollar has caused commodities to fall and the markets to move. The Federal Reserve has been helpful keeping rates low instead of raising them in the face of record oil prices. But the strength of the dollar has caused all commodities like oil, coal, gold, and agricultural products to fall dramatically. Lower commodity prices will allow rates to stay low and the consumer to spend more of their income on domestic products instead of energy.

Europe and China Are Worse than the US

            Since currency values are pegged against each other, the US Dollar has also been a benefactor of the weakness in Europe. As the European bank raised rates, the Euro fell and money moved back into the US Dollar. China has also been helpful to the dollar as the economy is in a tailspin with the Olympics soon to end and investors questioning the future growth in the communist nation. China’s weak stock market has also freed money for US stocks and an increased interest in their safer securities.

The Trade

            At this time you could eliminate all short positions and begin to build new positions in the best stocks of the best industries. Industries that have done well of late include Gaming/Casinos, Diary Products, and Restaurants.