Beware the crowded long US Dollar trade. Commodities, including gold and silver have taken a hit recently as the world turns bullish on the US dollar. I am not sure that bullish should be the word as it is really that the dollar temporarily looks less worse than the ill fated EURO. All FIAT currencies are terminal. Relativities between currencies is only short term noise. They will alll return to their intrinsic value of zero, some quicker than others. Gold is the only currency that cannot be printed without limit. It will take more and more paper currency to buy gold, not becuase gold is going up but because paper is becoming worth less. The next week or two could be good for non US Dollar assets as the latest CFTC position reports shows speculators and funds at 5 year record net long positions. We all know what markets do when one side of trade becomes crowded, don't we? Expect gold, commodities and stocks be stronger in the short run.

In terms of small speculators in Dollar futures, we're seeing an all-time record high in their net long position. Of course, small speculators are just a drop in the bucket in that market; they hold only about 10% of all outstanding long contracts.

Large speculators (usually trend-following futures trading funds), however, are a huge factor, and they are now holding 79% of all long positions. That's the 2nd-highest in history behind only November 2005. That wasn't a great time to be holding Dollars along with the funds.

The other measures confirm that "dumb money" is exceedingly optimistic about a trend change in the buck, and they've put their money where their mouths are. Surely, this could be something like September 2008 when sentiment had also become quite optimistic, and we saw nothing but a short (though severe) dip before a ramp higher in the Dollar.

That was during the credit crisis, and perhaps if this sovereign debt situation turns even uglier and spreads, then we'll see another stampede into perceived safety. That would include a rising Dollar, and it would overwhelm any other sentiment, technical or fundamental measures.

As long as we're in a "normal" market, however, we should see a general decline in the buck, which would, assuming the recent correlations hold, bode well for stocks.