Wild Friday Chart Action

I think this is the most important chart you can take away from today's wild action, after the Fed cut its discount rate by 50 basis points ...Other charts are a mish-mash. The Dow and Nasdaq-100 both bounced higher off their 200-day moving averages this week, but they also recently broke down from head-and-shoulder patterns.Gold and silver seem to be recovering, but today's action was contained inside yesterday's action, forming a bearish harami.Still, that's not a nail in the coffin of gold by a long shot -- not with the chart of the US dollar looking this bad.

The trend is your friend until it ends. The downtrend in the US dollar was just tested and it held. The only bets I'd look to put on right now would be bearish US dollar bets.

Why did the US dollar slam its head on a downtrend? Well, traders probably figure that the Fed isn't through cutting rates, and the Fed Funds rate could be next. As I've said before, about the only thing holding up the US dollar now is the fact that we pay higher interest rates than investors can get in Japan. If you start chipping away at that, the dollar could be in for a serious tumble.

In any case, the way is now open for the US dollar Index to go revisit its lows around 80.

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