Up, Down and Repeat... Will There Be a Sustained Move and in Which Direction?

As long as there continues to be uncertainty in regard to the US Debt Ceiling, QE3 and the risk of default on sovereign debt in the PIIGS, the markets will continue to swing up and down with speculation, optimism and fear.

There will likely be uncertainty around these topics throughout the summer. The reason I expressed concern (in the previous post) that the market could see another leg down, is because the commodity complex continues to have the potential to correct further. It would be in the Feds best interest to see this happen because it would support their case that inflation is not a problem and that, in fact, deflation is the concern. Falling commodities and a weakening stock market would be the easy catalyst for the Fed to move ahead with more stimulus. It doesn't mean another move down is inevitable, but it presents the possibility. If so, it will be a buying opportunity. The market will eventually move to new highs, but until we see some sort of confirmation that the debt ceiling will be raised and/or that the Fed will confirm another round of stimulus, the timing of catching the move will be uncertain.

Worth Mentioning
In the FOMC minutes from yesterday, some participants supported that there could be a need to provide additional monetary policy accommodation. Reaction sent the markets ripping higher yesterday morning, but the gains were not held as the choppy action continues.

Precious metals also ripped higher in reaction to the Fed comments. The difference with the metals is that they have been holding their gains. Bernanke and the Fed would prefer this not happen as they will have to find new ways to skate around the fact that inflation is not a concern. Good luck with that. With sovereign debt fears in Europe, inflation fears in China and Brazil and a continuation of loose monetary policy by the Fed and other Central Banks, global interest in the precious metals is only growing. The metals can be a risky and volatile asset to trade, but looking into the future, they are the safest asset to own. I like buying the dips in the metals for as far as I can see.

Current overall market bias: Expect choppy action to continue.