Since last March 17, the New Zealand dollar against the US dollar (NZD/USD) or the Kiwi pair has been trending up as seen at its 4-hour chart above.

Whenever the U.S. Dollar Index declines the major stock market indexes will inflate and advance higher. The chart below clearly defines this inverse relationship in real time. The U.S. Dollar Index has now declined lower by 17.0 percent since June 7, 2010 when it traded as high as $88.70 per contract. This morning the U.S. Dollar Index is trading around $73.85.

Traders can easily see by this chart that when the U.S. Dollar Index declines the S&P 500 e-mini futures rally higher. This is the main catalyst for the gap higher open in the major stock indexes. We can only wonder when the falling dollar will become problematic for the stock market. It has already become problematic for people around the world as inflation is skyrocketing.

So far in 2011 the equities market has made some sizable whip saw type moves that even veteran traders have had difficulty being on the right side of the price action. The year started out with equities being very overbought and extended making is virtually impossible for a low risk trader to buy on pullbacks.