As everyone knows, the dollar and stocks seem fixed in this Lucy-and-Harpo-esque mirror image trading pattern. The dollar’s relative stability on Tuesday, seemed to keep the trade from really getting rolling, resulting in a flat performance from stocks.

And while pretty much everyone expects the dollar’s recent slide to continue, the numbers crunchers at Bespoke Investment Group point out that we’re still not even at our 2008 lows on the trade-weighted dollar index. Bespoke’s analysts write:

This is not to suggest that the dollar hasn’t been falling in value versus other currencies, but it isn’t in uncharted territory either. Before last year’s lows come into play, the dollar would still need to fall an additional 6% against other major currencies. With this 6% gap between current levels and the last year’s lows, investors hoping for even a bounce of support may have to endure further declines in the days and weeks ahead.

Expect the dollar Wednesday to likely take some of its direction from a raft of economic data from China that’s due to be released overnight. Strong industrial production numbers there will likely convince investors that it makes even more sense to sell the dollar to buy higher yielding assets such as the raw materials China needs.

• Up for the fifth straight trading day.

• Longest advancing streak since the five day ended September 10.

• Highest close since October 3, 2008.

Nasdaq Composite, fell 2.98 points, or 0.14% to 2151.08.

• First drop in four days.

S&P 500, down 0.07 points, or 0.01% to 1093.01

• Snaps a six day winning streak.

• Fell three of the last four sessions.

Comex gold for November delivery gained $1.10 per troy ounce, or 0.10%, to $1101.90.

• Up for the seventh consecutive trading day.

• Longest winning streak since the seven day gain ended September 28, 2006.

• New comex record settle.

1.) The credit raters would see more oversight.

2.) Many derivatives and over-the-counter financial products would be required to trade on regulated platforms.

3.) Advisers to hedgies and other pools of cash would be required to register with the SEC.

4.) Would consolidate bank supervision into a single regulator — the Financial Institutions Regulatory Administration.

5.) It’d create a new Consumer Financial Protection Agency to oversee the products made available to consumers.

6.) The bill includes provisions that would change the way the Federal Reserve chooses directors at the central bank’s 12 regional banks, throwing the Fed’s independence into the broader debate on regulatory reform.

• Up for three consecutive trading days.

• Up four of the past five trading days.

Shanghai Composite, up 3.03 points, or 0.10%, to 3178.61.

• Up for eight consecutive trading days.

• Highest closing value since Tuesday, August 11, 2009.

FTSE 100, down 4.63 points, or 0.09%, to 5230.55.

• Snaps a four day winning streak.

DJ STOXX 600, down 0.43 points, or 0.17%, to 245.31.

• Snaps a four day winning streak.

India’s Reserve Bank’s well-publicized recent purchase of some 200 tons of the stuff from the International Monetary Fund “comes on top of the 454 tons of gold China has added to its reserves since 2003, which have now become reflected in official IMF records,” Goldman writes.

“In addition to this potential shift of central banks from being net sellers to net buyers of gold, the continued weakness in real interest rates continues to provide strong support to gold prices over the medium term,” Goldman analysts write.

Low interest rates could make for “upside risk” to Goldman’s price forecast of $960 a troy ounce. But we can’t help but notice that they haven’t raised their forecast even though we’re already around $1,100. The obvious question is when does Goldman see a pullback coming?

Interestingly, if Moody’s is correct in its assessment that the Fed and the Treasury are both likely to get paid back all or most of its loans/preferred equity, then there shouldn’t be a big incentive for the government to restructure its deal with AIG. Thus, the Moody’s news is likely positive for AIG bondholders but its not clear to us whether this is positive for the common equity.

You’ll remember that AIG’s stock price surged a couple weeks back on reports that the powerful House Oversight and Government Reform Committee confirmed receiving a proposal from former CEO Maurice “Hank” Greenberg to restructure the government’s bailout of the insurance giant. (Restructure in this case, means basically easing the conditions attached to the government cash AIG received.)

AIG’s pitch to the government is likely something along the lines of, “it’s better to soften your terms and get a lower percentage of something, rather than all of nothing.” So anything that would weaken that argument makes it less likely that the Feds ease their payback requirements. An easing of terms would at least cut down at the margins some of the massive liabilities that currently make it far from clear that there is actually any value in this company for common shareholders. Not that investors gambling on this stock really care about quaint notions of fundamental value.

If the Dow Jones Industrial Average can’t hold onto a gain through the closing bell, the measure will snap a four-day winning streak during which it has added 4.7%. The blue-chip average also entered Tuesday’s action up 56% from its 12-year low set in early March.

Most traders acknowledge that the gains have been fueled by a flow of cheap money thanks to low interest rates from the Federal Reserve and other central banks around the world. But there is some disagreement on Wall Street about how sustainable a rally driven almost single-handedly by easy money will be in the months ahead if measures of the so-called “real economy,” including employment and demand for commercial real estate, remain sluggish.

“We’re very leery about the economy and what kind of recovery we’re going to have, but we’re much more bullish on the equity markets,” said mutual-fund manager Ryan Jacob, of Jacob Asset Management.

He and other money managers justify that apparent contradiction by casting the market’s March trough — which also included 12-year lows in major indexes — as a product of overwrought fear following the financial crisis that erupted a year ago.

In the bulls’ eyes, the rally that has taken place largely represents a normalization for the market that is justifiable even if key parts of the economy remain weak. ”I’m not saying I think we’ll get another 50% gain here,” said Mr. Jacob. “That low-hanging fruit is probably done, but I do still think we can get decent returns.”

Strategist Bill King, of M. Ramsey King Securities in Burr Ridge, Ill., is more skeptical, comparing the recent rally to the market’s peak in October 2007. Broad measures of housing prices — the underpinning of Wall Street’s credit bets and many everyday Americans’ wealth — had peaked in the previous year. But the Dow and other indexes managed to post gains through most of 2007 anyway, fueled in part by bullish sentiment that was able to work as self-fulfilling prophecy for awhile.

“You can’t account for funny money in a rally,” said Mr. King. “It looks to me like we’re just replicating that late-2007 market here,” suggesting that another pullback may be on the way.