The carry-driven sentiment in the GBP/USD pair is a bit overpowering right now so traders should keep an eye on the status of the equity markets and other FX carry trades like GBP/JPY.

This week John Mauldin looks at why there are more mortgage write downs coming (in a self-fulfilling prophecy) in the financial sector, how an obscure new accounting rule is shedding light on a lot of risk in the world's banking system, how this is all tied to the consumer and is part of the reason for the fall in the dollar.

Suddenly, the question marks are back. What is the meaning of the credit crunch? Is Bernanke fighting inflation, or fighting deflation? Are stocks going up? How about the dollar? Is gold hitting another peak? And what is ANYTHING worth when EVERYTHING floats on a bubbly sea of shifting exchange rates?

Toni Hansen has been watching for the potential for the market to set up a third wave of buying in the S&Ps and Dow to slightly higher highs. That is going to now depend upon how the market continues to react to the current support level. As long as the upside momentum is strong, the scenario will hold.

The European Central Bank and the Bank of England both left interest rates unchanged, which was right in line with the market's expectations.

There’s a little more than a trillion dollars worth of subprime mortgages outstanding. We’ve heard that as many as one out of six of them is in trouble. And after you put these mortgages in CDOs and embed some options in the derivative contracts and get mathematicians to gin up models so you can leverage them to high heaven, there’s no telling how large the losses might go.

Fed fund futures are pricing in a 70 percent chance of yet another 25 basis point cut on December 11, but what about that pesky inflation issue? Won’t more accommodative monetary policy only fan price pressures?

The market continues to fall in afterhours trading. This leaves the door wide open for a retracement in the Dow back to the 13,000 level with the market easily testing the price congestion from August and early summer.