Fourth quarter GDP (5.7% annualized) blew away everyone’s expectations, consumer confidence is up, manufacturing’s up, and most importantly; Microsoft, Amazon, Intel, IBM, and something like 86% of the rest of the companies reporting have either met (8%) or exceeded (78%) earnings estimates. If you’d have told me all this on top of last week’s huge political upset in Massachusetts, I’d have told you the Dow would be somewhere north of eleven-thousand right about now.

So what on earth is going on? Well…. there’s China upsetting the global-growth apple cart by tightening their monetary policy. Then there’s the sovereign debt worries over in Europe. Then there’s the proposed bank-tax that was announced just before the market began heading south (hmm). Then there’s the so-called “Volker Plan” (more bank hammering) announced by President Obama last week. Then there’s the fact that the market has not sustained a single correction (10% drop) since it bottomed on March 9th of last year. Then there’s a few more ‘then there’s’, but we’ll stop with these.

It seems that for every good bit of news there’s an offsetting downer (or two), and it appears for the moment that the market’s looking for any excuse to sell off.

But honestly, while all them ‘then there’s’ are surely weighing on the market, I’m thinking this sell-off is more about what the greenback’s been up to than anything else.

Throughout last year I offered up a number of commentaries on the inverse relationship between the dollar and the stock market. If you were to lay one chart on top of the other, you’d see perfectly negative correlation all through 2009. I.e., when the dollar declined the market gained, when the dollar gained the market declined. And if you did the same charting for the past few days you’d see the exact same story play itself out.

So as it turns out, our currency is indeed reflecting the recent good news, and quite frankly, a stronger dollar, in spite of what it does to the market (short-term), is ultimately a very positive thing for the economy.

Now if you’re totally confused, I completely understand, this stuff ain’t easy. Therefore I’ve included the following excerpt from a previous blog that should help you put this current dollar/market relationship into perspective.

Why A Down Dollar Means an Up Market (Short-term)