I’m going to call a spade a spade here and say that it’s pretty easy to move 10-12 stocks in a price-weighted index like the Dow Jones Industrial Average which can have huge spillover effects into other markets, creating momentum-driven buying or selling — especially in today’s algorithm-based pseudo markets — that are completely divorced from reality.  For those invested heavily in the major indices these are great times but the party lasts only so long as commodity prices refuse to tag along.  And so far, that has been the case. Brent crude continues to hold the $110 per barrel level while Gold and Silver have been capped below $1585 and $29.10 per ounce.  Copper has not responded to this rally and neither have base metals prices.

Liquidity cannot stimulate demand when an economy is soaked to the gills with debt.  At this point knowing that consumer spending in the U.S. is being driven not by wage increases but redemptions or loans taken against 401k’s and credit card borrowing one has to wonder just how long such conditions can continue.  Now, I believe in liquidity-driven rallies being real.  I do not believe in liquidity-driven rallies where inflation sensitive assets refuse to tag along with equities.  And if they continue to do so the only things that can happen next are bad — either the money flows out of the markets and into non-dollar denominated instruments — since there is no yield to be found anywhere in Dollar-denominated assets or commodities play catch up igniting a CPI rise and subsequent demand destruction wave that would have all discretionary spending going to buy food and energy.