The dollar has now rallied enough to reach the 200 day EMA. This was a given after the 50 day was breached. Commodities have felt the pain, but not stocks. What gives?

The fact that stocks have held up here is a clue to me that the dollar will continue to strengthen and pierce the 200 day. It also suggests that stocks will continue their strength and move higher as well. How long that lasts will be the question.

The reasoning will be that the economy is strengthening thereby justifying higher interest rates and a stronger dollar. And since the economy is strengthening, profits will be higher supporting higher stock prices. Presto. Just like that the inverse dollar/stock trade is gone.   

The 1121 area of the S&P could be that last hurdle in the way of this bullish interpretation. It appears ready to fall at any moment.  The light holiday trade may be just the environment to slay nasty resistance and run the stops that surely rest just above that level. We shall see.

What all of this means for Gold, Silver and the rest of the commodities world is where it could get confusing. I would expect Gold and Silver to hold up better than other commodities, with Gold perhaps not falling much below $1000. It's day in the sun is far from over.

Perhaps the best trade here is to pick up the metals and other commodities on weakness. It could be a hard ride to stomach, but it should pay off longer term.

So now the battle rages at the 200 day for the dollar. This is not the ideal time for it to be occurring, but that's the hand we've been dealt.