Stocks Look to Break Out, But if Dollar Strength and Rising Yields Continue - Look Out

The U.S. Dollar Index is trading $79.80 after bouncing off of the 20-day moving average of $79.55. It's very hard from a fundamental viewpoint to be a dollar bull; however, European contagion fears and rising yields despite QE could be the Grinch that stole the Santa Claus Rally.Equity futures continue their strong uptrend last evening, hitting $1,235 -- well above the 68.1% Fibonacci retracement from the 2007 S&P highs to the March 2009 S&P lows. In any other market this would be a very bullish development, finally breaking above the April top in a meaningful way. However, many of the economic crosscurrents are at odds with continued strength in equities. 50% of Americans polled said they are worse off this year than last year financially, and unemployment is back around 10% despite a myriad of stimulus programs, EPS gains, and treasury buying from the Fed.... Read more