As I write this I'm listening to Larry Kudlow complain about a weak dollar and gold heading towards $1000 an oz. Now correct me if I'm wrong but wasn't it Larry Kudlow, Jim Cramer and the media in general that were screaming for rate cuts in Jan. as the market was falling? I said at the time they should be careful what they wish for as they might get it. Well we did get the "Shock and Awe" rate cuts and now we are paying the price. People just can't accept the fact that there is no free lunch in this world. The consequences of cutting rates is a weak dollar. Did these people really think there would be no after effects of slashing interest rates? That all the Fed had to do to fix all our problems was to cut rates and expand the money supply? Do these people really believe this nonsense they spout? Ahh if it was only that easy to avoid recessions. Let's just keep interest rates under 1% and print all the money we'll ever need and we'll never have bad times again. Wait a minute hasn't Japan been using this solution now for 17 years? If I remember correctly the Japanese economy has been in and out of recession during this entire time and it apears they are headed back in at the moment.
If the dollar is starting another leg down then we probably have more room on the upside for the precious metals. Major lows in the dollar haven't occurred until the dollar has dropped 7.5-9% below the 200 DMA. The dollar is currently only 6.2% below the 200 DMA. We have plenty of room on the downside for the dollar to drop before it gets oversold enough to trigger a bounce. More in tonight's update.