Commodities entered a bull market as grains rallied amid the worst U.S. drought in half a century, while the euro climbed on optimism leaders will make progress taming the debt crisis. The Standard & Poor's 500 Index failed to remain above a four-year high.

The S&P GSCI gauge of 24 raw materials rose 0.9 percent to 675.55 and has jumped 21 percent from this year's lowest close on June 21. The euro strengthened 1 percent to a six-week high of $1.2488. Ireland's nine-year bond yield dropped below 6 percent. Germany's two-year yield rose above zero for the first time in more than five weeks. The S&P 500 slipped 0.4 percent to 1,413.17 after climbing as high as 1,426.68.

The drought that has parched fields in the U.S. Midwest sent soybeans to an all-time high on the Chicago Board of Trade today and the U.S. Department of Agriculture has cut its corn harvest forecast by 27 percent since June. As Luxembourg Prime Minister Jean-Claude Juncker, head of euro-area finance ministers, prepares to visits Greece tomorrow, optimism about Europe's efforts to fight its crisis wasn't enough to push the S&P 500 to a new high.

"We've come a long way and we're approaching some long- term resistance points" in the stock market, said Paul Zemsky, the New York-based head ofasset allocation for ING Investment Management. His firm oversees $170 billion. "That's causing people to pause a little bit. We're going to need some real news to break through these levels and we're not getting any right now."

David Fuller's view It has been fashionable, not least among holders of government bonds, to either deny the existence of a commodity market supercycle or that any inflation was occurrijng in the west. Well, the unweighted Continuous Commodity Index (CCI) (Old CRB) (historic, weekly & daily) shows the supercycle commencing in 2002 clearly enough. It was partially retraced during the sharp recession commencing in 2008 and also by the global economic slowdown beginning in 2Q 2011. However, an important low was reached in early June, just above the psychological 500 level, and following a period of sideways ranging CCI extended its rally today.

The world has been unlucky recently, in terms of commodity price inflation, because the recent rise in CCI was triggered by supply concerns for staple foods. Usually, it is a pick up in global demand which lifts commodity prices in line with stronger global GDP growth. Unfortunately, the US drought has had a devastating affect on corn (weekly & daily) and soybean (weekly & daily) yields. Prices are still rising because this shortfall can only be partially offset by supplies elsewhere.

Respite from the recent setback in crude oil prices (Brent, weekly & daily) (WTI, weekly & daily) was short lived. This is not due to increasing global consumption and does not appear to be caused by a shortage of supplies, despite sanctions against Iran. Instead, it caused by speculative hedging against the possibility of a military strike by Israel against Iran's nuclear facilities. Consequently, oil prices could fall back sharply if rumours of an attack wane. However, there is no evidence of this at present and oil is not far below levels that presented both an inflationary problem and a headwind for the global economy earlier this year.

Lastly, precious metals are breaking up out of their recent ranges as you can see from these daily charts of gold, silver, platinum and palladium. Short covering has undoubtedly been a factor and this move is likely to attract renewed investor interest, providing further evidence commodity price inflation.

Rising commodity prices, particularly in the form of crude oil, pose a threat to the upward progress of stock markets which we have seen since early June.