The Only Thing You Need To Know (DJIA, SPX)

The only thing that drives the U.S. equity markets these days is the dollar. If you can figure out where the dollar is headed, you can make a lot of money. Today we got news that China raised its benchmark interest rate for the first time since 2007. This move is meant to combat inflation and cool down an overheated real estate market. Almost instantly, investors dumped "risk currencies" such as the Aussie dollar and piled into the U.S. dollar. The dollar index is up 1.26% today to 77.906. The dollar has been under pressure since September on expectations of more Federal Reserve easing. But, many believe these expectations are largely priced in. If so, the dollar is likely to rally. As the dollar rallies, commodities and stocks will come under pressure. It's no coincidence that the dollar's biggest upward move in over two months coincides with the Dow (

) dropping 107 points and the S&P 500 (

) dropping 10.5 points. Stay tuned! Those predicting the death of the dollar may be in for a painful ride very soon.