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Today’s rally in oil and other commodities that pushed the entire stock market higher was built on a weak dollar and a stronger Euro.

Right now this looks like just a euro bounce. A one (or at most a few days) wonder.

The Euro is still well below its 200-day moving average, which indicates that the trend for that currency still points down.

But the Euro has tumbled so far and so fast that technical indicators are pointing to the strong possibility of a short-term rally.Such a rally isn’t likely to go very far given the big problems still facing the Euro and the continued fighting between Greece and the countries that would have to lead any concrete rescue attempt, France and (most conspicuously) Germany.

If the dollar is set to resume its strength after a short-term Euro rally, then investors who have been looking for an opportunity to reduce commodity positions should sell into this rally. It might be the best opportunity they get for a while.

Unless that is you believe that when China’s leaders return from their New Year holiday next week, they will make a sudden announcement saying that attempts to reduce bank lending and slow economic growth from late January until mid-February were simply a mistake by a junior level clerk who acting without the permission of superiors.

Not likely. (See my how to worry post for what I regard as more likely scenarios.)