There's no joy here folks.  Let's look first at the bullish view: This is just a normal little dip - buy it.

The daily chart appears to support this.  Prices stopped this morning on the trendline, and that would appear to be a pretty-attractive buy-point.  There's a problem with this thesis, however, as is illustrated here:

Here's the problem - we've bought the move from January to now with dollar weakness.  And worse, the effect is wearing off - that is, dollar weakness is now becoming negative for the market.

I have often written about the "nightmare" scenario for Bernanke - a market that stops responding strongly to further monetary games.  That is, he monetizes debt and instead of producing a ramp the result is a flat market - or even one that starts to break down.  This is akin to the common reaction to all addictive behavior - it feels great when you start, but the longer it goes on the worse the damage gets until you're either forced to dry out or you die.

Unfortunately the real economy is also running into trouble.  The monetary games have enabled $1,700 billion in deficit spending over the last year alone, and more than $4 trillion over the last three years.  All of that "pumping" has done only thing, however: It has bolstered the big banks' balance sheets.

How does this help you?  Well, it doesn't, unless you both want to and can afford to borrow more money.  But we got into this mess of an economy because people had borrowed too much money!

So now we sit in an interesting place.  The dollar can move lower by another couple of percent without breaking the all-time lows.  But somewhere there is a place where decline turns into rout.  That place is where oil goes up a double-digit number of dollars a day, where gasoline starts pricing upward in quarters instead of pennies, and where the alleged "economy" takes a .50 cal round to the head.

Bernanke must prevent that, since Congress won't.  They won't stop spending on their own - they're going to have to be forced to stop. That forcing won't come from a polite suggestion - it will come only from actual force that the market imposes upon us, much as it did with President Clinton.

Unfortunately the policy response options available to the Chairsatan are decidedly limited.  If monetization or even balance sheet rollover produces weakness, he has little he can do other than to defend the dollar.  That he can easily do by reducing the divisor (number of dollars) but that act will expose the bogus lending on the bank balance sheets and increase the cost of borrowed capital.  It will also spike the stock market - lower.

Hmmmm... might it be that the limits of this game of distortion are finally being reached?  Perhaps.  Certainly commodities - especially Silver - are saying that the usual response to monetary debasement is no longer going to produce the "expected" response.

It would appear that extreme caution is advised.