Dollar and Dow

From Charting Stocks: "... Why is the dollar surging? Europe. The real reason (in my view) that our stock market has been so effected by European issues is the dollar dynamic. The US Dollar Index measures the US Dollar against a basket of foreign currencies, the largest of which is the Euro. As the Euro (The largest component of the basket) drops, the Dollar will rise.
For the record, the Dollar-Stock phenomena is not quite normal. During periods of strong economic expansion (such as the ’90s) both rose together as money flooded into our markets and pushed up demand for both. Since 2002, however, our economy has been reliant on excess liquidity to prop up our asset valuations. Assets did rise but only as the value of the currency used to buy them in fell.

Bottom Line: The VIX and US Dollar could mean trouble for stocks..." Read more