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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