NEWS: The US markets exploded higher after an unprecedented move by the Federal Reserve sent the Fed Funds rate to the lowest level ever. The move today to lower rates from 1% to a range of 0% to 0.25% was a surprise to me and many others on the Street. Though a good surprise for stocks as the major indices rallied - the Dow closed up 359 points or 4.2%. The S&P 500 had an even better day, gaining 44 points or 5.1%. Even better yet was the NASDAQ, surging 5.4% or 81 points.

THE BOTTOMLINE: It is clear the Fed had something to say about the current situation and they did not skirt around the issue today, making what I feel is their biggest move throughout the recession. Today the Fed told me that things are bad and they are willing to do whatever it takes to keep them from getting worse. This is exactly why the market rallied; however, my concern is that stocks got ahead of themselves today and could see a pullback in the coming days after the real news sinks in. The reason I am hesitant to move from the “neutral” camp to the side of the bulls has to do with the lack of lending taking place throughout the world. The rate cut today made for great headlines, but what it does not do is force the hand of banks to begin lending again. Also, keep in mind that the lending that has been going on between banks was already at rates at or near zero percent. I do not want to take away from the action today, what I am cautioning against is thinking this is the end of the bad news and that the Fed can print money until the problem goes away. See the next section for my thought on the US printing press.

Believe it or not we now have rates below that of Japan (0.3%), this is one thing I thought I would never see and hoped I would not. But it is hear and enough about my musings, it is time to turn to the charts to get through all the noise. With the S&P 500 and Dow both breaking though their respective 50-day MA’s for the first time since August, it could be another step in the right direction. That being said, I am not convinced until we get the indices to hold above the indicator for a few days and the rally through the highs of two weeks ago. At that time I will be forced to become at least slightly bullish on the overall market.

I am sure many of you are wondering why I am suddenly not overly optimistic on the market. Don’t get me wrong, I have been optimistic and even outright bullish on certain sectors and stocks for months and I continue to keep that tone. My rant tonight is in regards to the overall market and would like to keep investors from running out and throwing darts at stocks thinking it is shooting fish in a barrel. The market is not there yet, so I want all investors to proceed with caution and at the same time - dump the stocks you have been holding onto and want to clear off the books.

THE BOTTOMLINE: The US Dollar Index came into today down 5.5% in the last two weeks and was sitting at a fresh two-month low. The selling continued today after the interest rate cut. Investors have a few options if they believe the US Dollar will continue to weaken: foreign currency ETFs, inverse US Dollar ETF, US multi-nationals, and precious metals. The SPDR Gold ETF (GLD), which we own for clients, was up another 2.3% today and is now 20% off the low of last month. As the US Dollar has fallen apart, the price of gold has risen to new multi-month highs. The gold stocks have been even bigger winners with the MarketVectors Gold Miners ETF (GDX) up 100% since the intraday low in October.

A metal that is often overlooked and that has struggled this year is silver. The iShares Silver ETF (SLV) was down 28% heading into today’s trading. But after the 4.6% rally today and the breakout from a bullish pattern, SLV is now back on our radar. The chart below highlights the breakout above the bullish “W” pattern and the 50-day MA. The next resistance level will be the $12 area, followed by significant resistance near $13.60. Investors can consider the silver ETF or if they want to take more risk, there are a number of silver stocks. For our TRADER Portfolio in The ETF Bulletin we will turn to a leveraged silver ETF when the time is right.