Today's big development is the breakout of the DX from the declining channel we've been watching. Along with that break came further battering of precious metals prices and an arduous, but nonetheless significant, decline in equity prices.
A handful of sessions ago, I mentioned that an upward escape from the channel would constitute final confirmation that the dollar has commenced its long-awaited countertrend rally, and with it, the long-awaited corrective moves in equities and precious metals. I also anticipated that the PM and stock corrections would be well under way by the time we received this confirmation. This latter expectation turned out to be true for gold, but not for stocks.
At some point I expect equities to play catch-up with the decline seen in precious metals. Perhaps a larger plunge will come after the SPX tests the 65 DMA or perhaps the impetus will come from some cryptic jargon spewed out of next week's meeting of the world's most insidious cabal, the FOMC. Either way, I suspect the action to be choppy and full of noise. However, now is not the time to be swinging at every pitch near the strike zone. The pitcher is getting weak. My plan is to sit back, get a beat on things, and take a Casey-sized swing for the fences.
Okay, let's make that a Babe Ruth swing. Casey struck out.