Dollar Surges vs. Euro, Oil Tumbles Again

The dollar is getting a big boost this morning, while the Euro is suffering its largest loss in 7 years. This is also helping to push oil lower again, nearing the $116 level. I have heard some traders say they are looking for support to come in around $110 for oil.

With the strong dollar, most other commodities are lower as well, including natural gas and gold. The trend lower continues to bode well for inflation expectations. This morning's unit labor cost report supports this, as labor costs fell for a third consecutive quarter to +1.3%. And the message is not lost on the stock market. The Dow is up +200 points this morning.

Asian markets were mixed overnight, with strength in Japan and Tawain, but huge weakness in China. This is ironic, as today's marks the start of the Olympics in Beijing. The number 8 is a lucky number in China, so it is no coincidence that the 2008 Olympics are slated to begin at 8pm on 8/08/08. Too bad all those 8's couldn't help boost their markets.

Despite the early gains in the market, optimism looks pretty subdued. The put/call ratios are high so far, while the ARMS Index is also elevated at 1.22. I don't like to see too much early morning strength, due to the propensity for late-day reversals. But maybe this short squeeze can hold up ahead of the weekend?