Last night the Shanghai Index rallied higher by nearly 3.0 percent. The rally in the highly followed Shanghai Index occurred after the Chinese central bank failed to raise interest rates as most economists had expected. Inflation fears have come over the Chinese economy as reports such as the CPI surged by over 5.0 percent. Recently the Chinese have increased bank reserves to try and curb speculating in real estate. However, the failure by the Chinese to increase actual interest rates has caused a spike in most commodity stocks this morning. Stocks such as Freeport McMoRan Copper& Gold Inc.(NYSE:

) are rallying this morning after the action by the Chinese. Oil, gold, and silver are also surging higher as this action by the Chinese has helped the U.S. Dollar Index to decline. As we all have seen before when China rallies the world seems to inflate higher and rally. This is really just an extension of the current inflation rally as the central banks around the world continue to keep interest rates artificially low in order to create inflation. Leading commodity stock Cliffs Natural Resources Inc.(NYSE:

) is another leading commodity stock that will often benefit from the weakening U.S. Dollar Index. These stocks will often rally higher when the U.S. Dollar Index pulls back or sells off. Therefore, keep one eye on the U.S. Dollar Index at all times. Should the U.S. Dollar Index catch a bid higher or begin to rally most commodity stocks will deflate and trade lower. At this time the stock markets around the world follow the Chinese markets like a hawk. The other major catalyst for a global stock market rally is the weak U.S. Dollar Index. It seems that as long as the dollar declines the world economies will inflate higher. This type of action can continue for a while, however, it will not last forever. Watch for signs when these current relationships seem to break apart or no longer work. Until then enjoy the inflation rally. Nicholas Santiago Chief Market Strategist www.InTheMoneyStocks.com