The dollar has been trying to move higher the last couple days, which normally would signal weakness for commodities. Gold has shaken off the recent strength in the dollar and just keeps chugging higher. Some might say gold has moved too far, but I believe it has the potential to move much higher. We could see a short-term pullback, but I would view that as a buying opportunity.

Corn, wheat and soybeans have been pushing higher. The grain commodities had been neglected since early summer as the crops were expecting to be very large this year. Indeed they will be, but the long-term picture is supportive. The next few months are usually a slow time of the year for corn and soybeans so the upside may be limited unless the inflation trade accelerates.

Crude oil has been stuck in a range for more than a month and you would expect it is just a matter of time before this market decides to break higher or lower. The fundamentals suggest lower prices unless the dollar rolls over again.

The soft markets like cocoa, sugar, orange juice and coffee have been holding steady, but not making new highs. The funds like to push these markets to extremes and this could be the calm before another storm. Cotton futures have been pushing to new yearly highs, which is nice to say from a market that has been beaten up the last few years.

Lumber futures are certainly one of the most illiquid commodity markets and erratic price behavior is the norm in the lumber pits. The price action in lumber futures has been quite amazing in the last month. January lumber futures have risen from 182 to nearly 240 in about four weeks. Most of that move came in just the last week.

The reasoning for the jump in prices is a little unclear. Some say demand is increasing and inventories are being replenished. This is the slow time of year for lumber demand, so it doesn't make much sense. Another explanation is that lumber prices have been in the doldrums much of the year and hedge fund managers might have sensed some value here.

It doesn't take much to move lumber futures, so this market could have been ripe for picking. New home starts have been weak, so it is difficult to see where demand is coming from. This could revolve around expectations for improving demand in the future or it might just be more of a liquidity enticed rally like the stock market and some other commodities. Regardless, this is a dangerous market to jump onboard - always trade this market with caution.

The U.S. Dollar Index fell 62 points to 74.80 on Monday, which makes this another new low for the year. The dollar has been trying to move higher the last few days, but just got crushed again today. This, of course, fueled commodities higher. Gold jumped $26 to close just shy of $1,143. Most other commodities were also sharply higher.

Commodities are working off the macro economic picture right now. The macro picture happens to focus on the Fed and the massive government stimulus programs. They have the spigots wide open right now with no indication they will back off anytime soon. The price action in gold and the dollar tell the whole story.

The trend right now is a momentum trend. Institutions are selling the dollar, while buying stocks and commodities - especially gold. Expect maximum exploitation out of this setup. I feel these moves are not sustainable and will end badly. That could be tomorrow or a couple years from now. The S&P (stock market) is just shy of a 50 percent retracement from the peak in 2007 to the low in March 2009. Could this be a top?

Crude oil prices have dipped back to $76 a barrel, which is the lowest price in about a month. Crude oil supplies continue to be well above last year's levels and the dollar is trying to rally. It is surprising that gold has rallied so strongly, yet crude oil has been drifting lower. On a pure supply and demand basis, crude oil should not be trading around $80 a barrel.

These are strange times and the economy is awash with liquidity. This funnels money into stocks and commodities and there's no telling how this will play out in the years to come. There is also the argument that much of the incremental demand for oil will come from China and other developing countries. That may be true, but many of the experts are also expecting the U.S. economy to grow sharply the next couple years.

I still think we are seeing nothing but talk yet and little economic growth. The government has skewed economic data for decades. The government is also throwing a large amount of money at this economy and interest rates have been holding near zero for some time. As Scotty would say - "I'm given it all I got captain!" If the economy can barely grow with massive amounts of stimulus, what happens when it is taken away? We can't afford to borrow money until infinity.

For crude oil, it is on strong support around $75. The market looks like it wants to go lower and the mid-60's would be a likely target. The key is to see if it holds the $75 support level. The high end of the range is $82 and it would likely take a huge drop in the dollar to break through there in the near term.