This 'hidden story' could mean more gains: Trader

While traders remain transfixed by the record run in stocks, an equally impressive rally is quietly happening in the much larger currency markets. And according to some market watchers, it could spell more gains for stocks.

"I think it's been the most interesting hidden story over the last couple of months. When you look at what the Fed has been saying, they clearly have been concerned about the stronger dollar," Boris Schlossberg said Wednesday on CNBC's "Trading Nation."

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The dollar index hit a three-month high Wednesday after Fed Chair Janet Yellen hinted that a rate hike in December remains a "live possibility."

In the past, a strong dollar has often been viewed by traders as a negative for stocks. Alcoa, IBM, Caterpillar and others have been pointing the finger at dollar strength for their respective earnings shortfalls. But recently, the rally in the greenback has corresponded with a strong move up in equities, a trend some feel could continue.

"Traditionally the U.S. stock market does trade with an inverse correlation to the dollar, just recently they're trading together and that's encouraging," Todd Gordon of said Wednesday on "Trading Nation." "In August you saw the dollar decline with the stock market, and since we have bottomed, the two have realigned."

But even if the U.S. dollar falls, Schlossberg said markets may see a "best of both worlds" scenario once the central bank does decide to raise.

"If the Fed does hike rates, it's going to be very much a one-and-done story ... at which point, I think the dollar rally actually starts to come down," said BK Asset Management's FX strategist. "[With] the economy still continuing to perform relatively well, equities could begin to rally off of that dynamic."

Read MoreThis is the real reason the Fed might hike rates

Added Gordon: "The dollar should be rewarded. [But] if the stock market can sustain the upward trajectory positive correlation, that remains to be seen."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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