Contrary Investments for 2011

NEW YORK (TheStreet) -- For the FRED Report's last column of 2010, we're looking at "out of consensus" features in the markets as we head into 2011.

In the FRED Report's 27 years on Wall Street, one of the things we have learned is the peril of "groupthink." One example of the herd mentality that may be manifesting right now is the technology sector. Tech has been one of our favorite sectors for the last two years, and now we note that eight out of the 10 strategists in the Barron's annual "Outlook 2011" issue are now overweight this sector. Is this justified by the technical picture?

Short term, we are starting to see weakness in the iShares Dow Jones US Technology Sector ETF(IYW) relative to the SPDR S&P 500 Trust(SPY). If this continues, tech may actually underperform for the first part of 2011 as investors may already have bought the sector.

Another contrary investment may be the U.S. dollar. Over the last year, we have seen many articles suggesting investors would abandon the buck, and that the dollar is doomed, yet the technical picture is somewhat different.

We show intermediate charts of the Powershares DB US Dollar Bullish Fund(UUP), Rydex Currency Shares Japanese Yen Trust(FXY), Rydex Currency Shares Euro Trust(FXE) and Rydex Currency Shares British Pound Sterling(FXB).

FXE and FXB look a bit weaker than UUP. The FXY is in a solid intermediate uptrend, but it is overextended. It is possible that the dollar has a strong 2011. Initially, this could be negative for commodities, but we think that commodities should rally into the end of 2011 as the dollar rises.

People tend to forget that commodities have fundamentals of their own and as such do not always move opposite the dollar. Compare the dollar chart with the following Powershares DB Commodity Tracking ETF(DBC) chart. The patterns are similar -- bases that look like they could resolve to the upside. This could be one of the big surprises of 2011.

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