Inflation will be a problem in 2011

We've been hearing a lot about inflation the past couple of years, but I don't think we've REALLY felt its impact yet--at least not to the point that I think inflation will reach. I'm not saying $15.00/gallon this year (it could happen) but maybe $5-6/gallon.

Commodity charts are behaving very suspicious to me especially gold. GLD looks confused; it's trapped in a range between $128 and $140. It doesn't know whether it should breakout or breakdown. I'm in the inflation camp so maybe I'm bias when I say it'll breakout. But I could be wrong because for the 4th time the GLD has tested its all-time highs but failed to breakout.


Gold isn't the only thing on my radar, turn your attention to agriculture. After an initial sell off, agriculture based and broke out! Check out the breakout volume.


A similar pattern is taking place in oil. A breakout is pending...


Finally, the dollar....we all know its doomed as long as Bernanke controls the money supply. The UUP is testing a double-bottom, and it gave an unimpressive bounce. You'd think with the disaster in Japan and the uprising in the Middle East more people would flee into the dollar, but they didn't!

There has been talks about ending QE-2 prematurely (I think it would be wise to do so) but what will result from it? A VERY weak market...cutting through the March 2009 lows would be very likely. Add to the fact that the "tea-party republicans" are looking to cut government spending? We will most definitely break through the 2009 lows with ease! Not because we need to spend more but because this economy for years has been living off of free credit. (Imagine giving a homeless unlimited credit, a black card from American Express, he will swipe that credit card and will look like the richest person in the room, but strip that credit from him what does he have left? Nada. The repo-man will come and that credit card will have one big fat interest rate attached to it)

Anyways, if things do lead to spending cuts and QE-2 does end, everyone will be mad and Bernanke will be forced to do QE-3, 4, 5, etc...that will cause massive inflation. I think the correction in commodities is a buying opportunity.