The higher prices that we have seen in the commodity sectors lately has, in my opinion, been due to a perception that the amount of money in the economy will rise. The amount of money in circulation is a function of demand for money. As long as the velocity of money remains low however, the volume of money will not rise. So the rise in commodity prices is in great part an expectation of improvement in the general economy. Weak wages for employees, and the general political and social climate in this country does not bode well for a sustained ability to pay these higher commodity prices. I believe that a period of demand destruction is in store. The difficulty of merchandisers to raise prices, and the subsequent margin pressures will cause stock valuations to fall. This will be the onset of general demand destruction, similar to the events of two years ago.
I am underweight (to use a wall st. phrase) the stock market at this time. And I believe is only a matter of time before the precious metals correct. Oil is a different story, as I believe that the high price of oil is actually deflationary for other sectors.
On a related note, technically, keep an eye on SKF, the short financials ETF.
Huge volume today, and up so far...