The TSE has a lot of commodities underlying it and these tend to be the last things to peak in bull cycles. The reason for that is that at zero interest rates it is the only game in town. I will add two more just to drive home the argument.

The “liquidity trap” occurs when interest rates are so low that the demand for money becomes perfectly elastic, which also happens to be the point where the Fed. has rendered itself irrelevant and impotent as monetary stimulus ceases to work. Put another way, you can open the flood gates but you cannot control where the water will flow. It flows into commodities as they constitute a real asset that may rise in value if for no other reason than that everybody is buying them. This is all the more so when commodities represent just a fraction of the capitalization of all investible assets and  works exceptionally  well when the funding currency, the US $ , is expected to drop in value. It is perfectly circular and consequently it is hard to say where it will stop. Certainly in this  environment , in which misinformation is rampant (see last weeks payroll number trumpeted with great fanfare as up by 159K, while the broader, barely mentioned,  household stat. was down 330k !) and where the prevailing investment philosophy seems to be entirely predicated on a ‘’ après nous, le déluge”, which may be exactly what we should expect sooner than later.

Given the equitization of commodities and the consequent artificial increase in demand it is hard to say when this has to stop. What we do know is that regardless of the  level of equilibrium between demand and supply in the end the marginal cost of production will be what the market will gravitate to (for gold that is about $400 or so, natural gas about $4 as so many have learned the hard way). Alternatively the income affect of ever higher prices over extended periods, like now with oil, will outweigh other stimulus factors and the whole thing will collapse The TSE is the single greatest recipient of these factors and now that QE2 has been formally launched ( perhaps that was the deluge?) it could be hurt the most.

Just look at how well all these charts correlate. Pork-bellies are of course the classical cyclical asset that performs with text-book precision every time. Also, the financials particularly the best one, RY, appears to have completed its a-b-c correction and has started its next down leg as anticipated a little while ago.