Today and tomorrow we will find out the degree to which the markets continue to be enthralled by the jawbones of policy makers. The big market is ripe for a correction of some sort; a routine one at least. The precious metals and commodities seem ripe for a rebound.
But there is sure to be talk of QE withdrawal in the air and we should realize we are subject to the reaction of market participants as a whole. Yesterday’s reversal and continued strength in the precious metals was a positive sign. When I began yesterday’s update the HUI was up 4 points. When I looked at it after the update it was up 10. It finished the day +14.
None of this means anything without follow through. We can allow for hit at today’s open and possibly throughout a noisy Tuesday and Wednesday. That is how unique yesterday’s reversal felt among all the false hope would-be bottoms over the last few months.
But risk should still be managed because risk should always be managed. I personally would like to see HUI hold 255 or so if there is a pullback. In my opinion, it is not a buy the pullbacks situation because the trend is down. I would rather buy firmness or strength in a limited way and upon getting through the Fed jawbones, add if all looks well. If the rally is real, this would pay off down the line. If it is not real, then buying a pullback would not work well.
My cash levels are still high, but I selected a several quality items yesterday due to the reversal. Now we find out if that was a wise choice or not.