The last few weeks of 2010 commodity prices rallied sharply but, like many sectors, all on light volume. Cynically, (who me?) one might suggest a sucker's trap was laid for fresh buyers as bearish insiders were ready to skin them. For example, base metals (copper in particular, just featured here Monday), precious metals, energy and even grains were bid up to favorable end-of-year mark ups. Tuesday bear raids occurred throughout the commodity sector taking out late buyers as stops were hit across the board.

What were they thinking?

It's a new season and year. It makes sense, so the pundits say, with economic data improving it's time to switch to stocks and away from hard money sectors. If so, this would also mean a rising dollar which is nominally bearish for most commodity markets.

But, won't an improving economy create more demand for "stuff?" Sure, but maybe not right away. After all, this has been a "here and now" market and this isn't the first "bear raid" we've had in commodity markets over the past year.

Were there any clues to this happening? Yes, DeMark 9 counts got us out of copper Monday morning and the declining Baltic Dry Index may have indicated commercial commodity buyers were sated with supplies.

The afternoon release of Fed minutes was uneventful although they tried "really, really" hard to explain rising bond yields in the face of QE. It was a fun read.

Stocks faltered throughout Tuesday trying to digest Monday's big light volume gains. In the end stocks closed mixed, bonds flat and the dollar higher.

Volume was once again light while breadth was negative overall per the WSJ.

Continue to U.S. Sectors, Stocks & Bonds

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