In the last few weeks several art auctions did not go as well as many experts had expected. Both Christie's and Sotheby's had seen a few disappointments at their most recent art auctions. Most recently the auction houses are working with the sellers to lower their reserves (the undisclosed minimum price a seller is willing to accept), which is a clear indication that the art market begins to soften again. 
As I highlighted in a previous article on SeekingAlpha, Sotheby's (BID is the ticker) has been an excellent indicator to spot bubbles early in the past. 
Sotheby's sold off early in all bubbles since 1988( the Nikkei Bubble, the Dot.com bubble and the recent Mortgage Bubble) which was the year it was listed on the New York Stock Exchange.  
Since its earnings announcement on Monday Sotheby's stock price (see attached chart) is in a free fall and perhaps it was once again an indication that a bubble is bursting, which would mean that there is a lot more downside in these markets left than many want to believe.

The tension in the Middle East has reached Saudi Arabia and who knows the market might be telling us something. Perhaps we will also see political tensions inside Saudi Arabia rise. 

If the dollar breaks down through its support then the US will start to import inflation and commodities should continue to rise. Of course a break through such an important resistance level would probably also accelerate the sell-off in the dollar. It would also lead to gold rising through its resistance levels (see charts of the week on our website for that chart).

Portugal's government debt yield has been rising for almost a year from 4% to 7.46% without any significant interruptions and that despite many efforts by the EU to stop a government debt death spiral for many of the smaller EU nations. Greece was the first victim in April 2010 and when the yield on its 10-year bonds soared over 7.5% from which point there was no looking back until the EU decided to bail out Greece. A similar thing happened to Ireland when its debt soared over 7.5% in November of 2010 and now Portugal's debt yield is just below 7.5% at 7.46% (see the chart below - the horizontal line is 7.5%). There are also reports about an increasing migration of the Portugese population from Portugal into Germany looking for jobs. Since the smaller European nations no longer have their own currency as a mechanism to balance their economy (through devaluation), their economies are increasingly suffering because of the strong Euro. A Portugese government debt problem could once again lead to a significant selloff in European markets and the Euro. 

The dot.com bubble which peaked in the year 2000 (Nasdaq in blue) took a very similar path as silver (in red) over the last 8 years until today. There is a chance that the recent sell-off in silver is just a consolidation before entering a final rally up. We will keep a close eye on the development. 

Last year commodities were among the best performers internationally and one of the big questions for this year is whether commodities as an asset class can do it again. One of the best indicators that gives a very helpful perspective on the long-term direction of commodities is the Baltic Dry vs. Commodities indicator. By definition the Baltic Dry shipping Index is a number issued daily by the London-based Baltic Exchange and the index tracks worldwide international shipping prices of various dry bulk cargoes, which mainly include coal, iron ore, grain and other commodities. 
As you can see in the attached 20-year chart the Baltic Dry normally tracks the commodity index very well with the exception of 3 times (red circles) over the last 20 years. Whenever the Baltic Dry and the Commodities Index reached a big gap then commodities eventually started to underperform until they started to correlate again. 
We can therefore expect an underperformance of commodities to start sometime in the next 2-3 months, perhaps after one big final blow-off top move to the upside. 

Silver has broken out of its (50-year logarithmic chart) triangle and is still accelerating. It is possible that silver will now go into a blow off top and reach $50 (slightly above its old all time high from 1980). It would be inline with the 30-year cycle in commodities and in interest rates. Every time interest rates reach a turning point it leads to a reallocation of liquidity into other asset classes such as commodities until a new trend has emerged. However, be careful as the risk increases with the exponential move. It could be over in a month or two. 

In the following chart I highlighted the US treasury bond yield versus the stock market yield (1/ market P/E) to get the following ratio. Whenever it is in the green territory then stocks are cheaper than bonds, when it is in the red bonds are cheaper. Right now stocks are much cheaper but the momentum is changing. Whenever the momentum picks up then you can usually count on a continuation of that trade (highlighted by the arrows), i.e. an outperformance of stocks.