ENERGY? NO THANKS.

Seems like everyone has now jumped back on the energy band wagon.To be precise energy, solar's, uranium and rare earths. I hear it constantly in the media.

However if something has gone up long enough and far enough to garner the attention of the media it's usually closer to a top than a bottom.

For instance, the oil service ETF is now stretched 33% above the 200 day moving average.

One has to wonder how much upside potential is left after a 5 month rally.

What I don't hear anyone talking about anymore is gold or mining stocks (unless it's to tell us that the bubble has popped).

While virtually every other sector has gotten extremely stretched above the mean the precious metal sector, the only sector in the world that is still in a secular bull market, has quietly moved down into an intermediate degree correction.

So when you hear the countless analysts spouting nonsense about the gold bubble bursting, or the fear trade coming off, or any number of ridiculous reasons they dream up for why gold has moved down, you will know the real reason for golds pullback is nothing more complicated than the average run of the mill profit taking event. An event that happens like clockwork about every 20-25 weeks on average.

These intermediate degree corrections are the single best buying opportunity one ever gets during a C-wave advance.

Also in the bullish column, sentiment in the sector has now reached bearish extremes. Even better is the fact that most of the sector has pulled back to long term support, and or tested a major breakout level.

The upside potential in many of the mining sector ETF's and bell weather stocks is now huge, even if they were just to get back to the recent highs.

One has to ask themselves whether they think the profit potential is biggest in a sector where everyone is falling over themselves to buy. A sector that has already had a huge move and is incredibly stretched above the mean.

Or if the odds might be better buying a secular bull market that has experienced a nice pullback. A sector where a return just to the old highs would already constitute a huge gain, not to mention gold should still have one more parabolic move higher this spring as the final leg of this two year C-wave finally tops out.

My money is on the area where no one is looking. 

Buffett said it best. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

On CNBC's Kudlow Report Tonight

On CNBC's Kudlow Report tonight at 7pm ET:

MARKETS

- Lee Munson, Portfolio Asset Management, COO
- Thomas Belesis, John Thomas Financial Founder and CEO
- Daryl Jones, Hedgeye Risk Management, managing director


IS BIG BEN A LIAR? IS GLOBAL INFLATION FAR HIGHER THAT STATS SHOW?

- Vincent Reinhart, American Enterprise Institute resident scholar; Fmr director of monetary affairs at the FOMC
- Brett Arends, Columnist, The Wall Street Journal

PROTESTS IN EGYPT TURN VIOLENT

- Bill Richardson, (D) Fmr. New Mexico Governor; Fmr. Ambassador to the U.N.; Fmr. Energy Secy
- Dan Senor, Sr. Fellow for Middle East Studies Council on Foreign Relations
- Gen. Wesley Clark, Ret. US Army General; NATO Supreme Allied Commander Europe (1997 - 2000)

FUTURE OF BAILOUTS, TOO BIG TO FAIL; HOW MUCH MONEY SPENT ON INVESTIGATIONS?

Neil Barofsky, TARP Special Inspector General

RX for Repeal...OBAMACARE VOTE

- CNBC's Hampton Pearson reports.

THE POLITICS OF OBAMACARE REPEAL -- GETTING DEMS ON THE RECORD FOR 2012

- Igor Volsky , Center for American Progress; "Howard Dean's Prescription for Real Health Care Reform" Co-Author
- Betsy McCaughey, Hudson Institute Health Policy Expert; Fmr. NY Lieutenant Governor (1995-1999)

Please join us at 7pm ET on CNBC.

ADP Jobs Report Strong For A Second Month

The market is mixed in early trading, as earnings reports continue to roll in as well as some economic data.

On the earnings front, we are seeing positive reactions in names like APKT, DIS, ERTS, and CAT. Negative reactions to earnings are hitting stocks like BRCM, AFL, and WHR (to name a few).

In economic news, the ADP Employment report showed an increase of 187,000 jobs in January, above expectations. Last month's figure was revised lower to 247,000, which is still the highest tally since 2006. The early consensus for Friday's payrolls report is for a gain of 140,000.

Asian markets were higher overnight, while China was closed for a holiday. The dollar is higher today, which could be weighing on gold prices. Gold is a bit lower to $1337. But oil prices are higher today near $91.35.

The 10-year yield is higher again at 3.45%. It would need to top 3.56% to break out above its recent 6-week range. The VIX is a touch lower near 17.50.

Trading comment: Yesterday's action was surprising in its strength. Some of this was likely a combination of short-covering by hedge funds that loaded up on the short side when Egypt broke out, as well as some first of the month buying by mutual funds. There are plenty of strategists out there still calling for a pullback this month, but so far their calls have gone unanswered.

While the market leaders corrected late last week, other sectors like energy and ag took the lead. So it was more of a market rotation than a full blown pullback. I have added to a couple names recently (EMR, WDC, etc). So while I still have cash to put to work, I want to take advantage of specific buying opportunities as setups present themselves.

long EMR, WDC, VIX calls

On CNBC's Kudlow Report Tonight

On CNBC's Kudlow Report tonight at 7pm ET:

MARKETS: BLOCKBUSTER STOCK RALLY; DOW RECLAIMS 12,000; S&P SPORTS 1,300; VIX DOWN MORE THAN 7%;





- Michael Cuggino, Permanent Portfolio Funds President & Portfolio Manager
- Harry Rady, CEO and portfolio manager at Rady Asset Management
- Steve Massocca, Wedbush Securities Managing Director

ECONOMY: INFLATION FEARS OVERBLOWN? STRONG ISM; WILL WE SEE 4% GROWTH? DOLLAR FALLING; GOLD UP

- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
- Michael Pento, Euro Pacific Capital Senior Economist; Euro Pacific Capital Vice President Managed Products

MUBARAK MAKES SPEECH TODAY, WON'T RUN IN NEXT ELECTION)
WILL MILITARY RUN COUNTRY NOW TILL SEPT? WHAT'S THIS MEAN FOR BROTHERHOOD? MESSAGE TO OTHER COUNTRIES? DOES THIS CHANGE PRICE OF FOOD, WHEAT, ETC?

- David Goldman, Senior Editor First Things Magazine; Fmr. Wall St. Economist: Bear Stearns & Credit Suisse
- Gen. Barry McCaffrey, U.S. Army (RET.); 4-star General; NBC News Military Analyst

MONSTER WINTER STORM

- Todd Santos, The Weather Channel
- Eric Fisher, The Weather Channel

EMERGING MARKETS: IS INFLATION VIRUS TAKING EMERGING BRICs OFF THE BUY LIST? IS IT TIME TO COME HOME TO AMERICAN STOCKS?

- David Goldman, Senior Editor First Things Magazine; Fmr. Wall St. Economist: Bear Stearns & Credit Suisse
- John Rutledge, CNBC Contributor; Fmr. Reagan Economic Advisor; Honorary Professor, Chinese Academy of Sciences
- Peter Morici, University of Maryland Robert H. Smith School of Business Prof; U.S. International Trade Commission Fmr. Chief Economist

Please join us at 7pm ET on CNBC.

Stocks Surge After Strong Manufacturing Data

The market is spiking higher again today, after a round of better than expected manufacturing reports, both here and abroad. The PMI for the UK rose to 62.0, its highest reading since recordkeeping began. The Eurozone PMI also rose to 57.3 last month. Here in the U.S., the January ISM Manufacturing index rose to 60.8, the highest reading in years.

Asian markets were higher across the board overnight, and Europe was nicely higher this morning. Greece's stock market rose 4% following an upgrade from Credit Suisse.

There was also another strong batch of earnings reports, including the likes of BIDU, APC, UPS, and PFE.

The dollar is down today, and so are most commodities. Gold prices are lower near $1329, and oil prices are down slightly at $91.89, after a big rise yesterday.

The 10-year yield is higher to 3.43%; and the volatility index (VIX) is down -10% today to 17.57, a big drop from its recent trip up to the 20 level.

Trading comment: The S&P 500 has rallied right back to its recent highs above the 1300 level. Yesterdays rally came on lighter volume, which is not what you want to see, but today I am seeing more stocks break back out to new highs.

When the market leading stocks began to correct recently, it looked like a sign the market needed to take a breather. But if those leading stocks quickly turn around and begin to move back to new highs, that would be telling. I don't want to make too much of one day's action (today), so we'll have to see if this trend continues or if the market is simply going to consolidate a bit longer around these levels.

long VIX

NEW POST

An intraday alert has been posted to website.

Bernanke and Ethanol Sink Egypt

Decades of autocratic government and a lack of free elections are, of course, the main drivers of the political upheaval in Egypt. But did the sinking dollar and skyrocketing food prices trigger the massive unrest now occurring in Egypt — or the greater Arab world for that matter?

In addition to Egypt, the people have taken to the streets to varying degrees in Algeria, Jordan, Libya, Morocco, and Yemen. Local food riots have even broken out in rural China and other Asian locales.

While the mainstream media focuses on the political aspects of this turmoil, they are overlooking the impact of rising inflation, driven mainly by record food prices. For example, former Bush advisor Dan Senor notes that Egypt is the world’s largest wheat importer. Yet because of skyrocketing prices, Egyptian inflation is now over 10 percent, while some experts estimate that Egyptian food inflation has risen as much as 20 percent.

So I have to ask this tough question: Is Ben Bernanke’s ultra-easy QE2 money pump-priming partially to blame?

Commodities are priced in dollars, and the Federal Reserve has been overproducing dollars for more than two years. Consequently, emerging markets throughout the world — and the food sector in particular — are suffering from rising inflation.

The CRB food index is up an incredible 36 percent over the past year, including 8 percent year-to-date. Raw materials are up 23 percent in the past year. Inflation breakouts have occurred in China, among various Asian Tigers, and in India, Brazil, and other Latin American countries. Even Britain and Germany are registering higher inflation readings.

In dollar terms, the price of wheat has soared 114 percent over the past year. Corn has surged 88 percent. These are incredible numbers.

And let’s not forget that the world’s poor are the hardest hit by food-price inflation. They literally can’t afford to buy bread. It brings to mind the French Revolution in the 18th century. When you see this kind of mass protest in the streets, spreading from country to country, you see a pattern that cannot be explained by local conditions alone.

The dollar is the world’s reserve currency. And the rise of dollar food prices is a global phenomenon. It is a monetary phenomenon, as much as anything.

And that’s why one can argue that the worldwide revolt against soaring food prices is an unintended consequence of U.S. Fed policy. That policy is aimed at reigniting inflation here at home. But unwanted dollars circulating worldwide are hitting foreign inflation rates first. We may well catch this inflation virus before long.

To be fair, not all of the food inflation can be blamed on the Fed. A good part of this problem can also be placed at the doorstep of bipartisan U.S. policies to subsidize ethanol.

According to the Wall Street Journal, in 2001, only 7 percent of U.S. corn went to ethanol. By 2010, the ethanol share was 39 percent. So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies. Egyptians who can’t afford to buy bread and have taken to the streets in protest might be very interested to know this.

Not even Al Gore still believes that ethanol provides any environmental benefits.

As the world watches events in Egypt play out, be mindful that if the U.S. fixed its mistaken monetary and energy policies, the forces of freedom and democratization would have an easier time of it in the rest of the world.