The soaring U.S. dollar may well sound the death knell for commodities, but it's actually a bullish sign for stocks. At least, that's what the chart work of Oppenheimer head of technical analysis Ari Wald suggests.
Wald begins his case by comparing a long-term look at the U.S. dollar index with a continuous commodity index.
"We're in a new secular, long-term bull market in the U.S. dollar—and conversely, a secular bear market for commodity prices," Wald said. "The best case is for commodities to flat-line here. Even if the worst is behind us, they need to base for a while."
So what does that say about stocks?
Well, Wald says that commodity weakness is very good news indeed for the .
Comparing the S&P to the continuous commodity index, Wald finds that the two prior secular bear markets for commodities (in the 1960s, and then in the 1980s into the 1990s) "coincided with secular bull markets for the S&P 500."
The technician's bottom line?
The rise in the dollar, and attendant decline in commodities, "gives credence to the big breakout about the 2000 and 2007 highs."