As I write this gold is up another $14 and oil is up $3. Many technicians will of course tell us the fundamentals don't matter. Personally I pay attention to both the fundamentals and the charts. In the short term fundamentals aren't going to influence day to day movements. The fundamentals however over the longer term are going to move the market in the direction it has to go. Case in point the commodity bull market since 2001. Fundamentals are more like a rising tide. You can swim against it for a while but you can't prevent it from coming in.
My theory is that this rally is nothing more than a blizzard of paper being created by the Fed to keep the markets levitated until the elections, which seems to be working BTW.
Unfortunately this is also preventing over stretched commodity markets from correcting.
I'm watching the dollar closely now. We are in the window of time when we could and probably should see the second counter trend rally in the dollar bear market. However if the Fed is creating too much liquidity for this to happen then the risk of the dollar rally failing is high. The fundamentals will eventually take the market were it has to go regardless of what the charts say.
Fundamentally, if there are just too many dollars floating around then the rally is doomed to failure. If this does unfold I hate to think where commodity prices are going.
Expect to see more media hype about evil oil companies and hedge fund speculation. I also expect to see margin requirements increased in the futures markets and perhaps we will see another round of index reweightings similar to the Goldman gasoline reweighting in 06.
I expect the powers that be will try any and everything to abort the stagflation outcome of the 70's from repeating. Heck they already measure inflation by removing everything that's inflating. It's a good start unfortunately it doesn't jive with reality.
Following down the same monetary inflation path as the 70's is going to ultimately lead to the same outcome as before no matter what new tricks and gimmicks the Fed tries.