The US dollar has come under pressure this week as the European Union has moved forward with a rescue package for the ailing Greek government. The EU’s loan package isn’t the be all and end all though and the issue of Greece ultimately defaulting on its debt is still a possibility. The bailout of Athens should only be viewed as a temporary reprieve for the euro. Over time we expect both the dollar and the euro (and all the other currencies that are being debased through the massive issuance of debt for that matter) to continue to lose their battle against hard assets such as gold and silver.

The US stock market has been unfazed by the goings on in Europe, with the Dow Industrials having briefly inched above 11,000 for the first time in a year and half and the S&P 500 flirting with 1200. The rally could carry the major averages higher, but there are some worrying signs that suggest the upside is rather limited.

We’ve mentioned before the steadily declining pace of trading activity. Trading volume on a 50-day moving average basis is off about 35 percent from where it was a year ago. On a longer, 200-day moving average basis, it’s off by about 22 percent. Now there’s nothing to say this won’t continue as stocks claw their way higher, but the lack of volume suggests that when stocks do start to come under pressure, as they invariably will, we’ll see a big jump in volume and that selling could feed on itself, making matters worse.Read more...