Watching The Relationship Between 3-M (NYSE: MMM) And The U.S. Dollar
Shares of 3-M Company (NYSE: MMM) are stalling as the U.S. Dollar
reaches a long term support level.
Chart Courtesy of StockCharts.com
3-M bottomed on June 8th, one day after the U.S. Dollar topped out.
And that makes sense. 3-M is an internationally diversified company
with huge overseas sales that tend to benefit from a weaker dollar.
That's why the stall in 3-M over the last few days is worth watching
with regard to the dollar.
Chart Courtesy of StockCharts.com
The dollar has taken a pounding since topping in June, with the U.S.
Dollar Index falling 7.7% during the period. 3-M shares have risen
18.7% during the same time period, roughly a 2.5 to 1 leverage, and
an excellent countertrend correlation.
Now, the U.S. Dollar Index has fallen to its 200-day moving average, the line
between bull and bear markets, and several things stand out.
One is that when the dollar trends, it does so for years. During the Bush administration,
the dollar basically went nearly straight down. In December it turned up, and
rallied for six months.
Now, the dollar's moment of truth has come, and 3-M may offer a good set of clues
as to which way things will break. If 3-M rolls over, watch what the dollar does.
If there is no dollar rally as 3-M falls, then an even bigger problem may lie
ahead.
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