Momentum Players

[langlui]

on 6-6-2012, rumors surfaced that a third round of quantitative easing -- or "QE3" -- is already in the works. While this is merely a rumor, the price action in gold, silver, and the dollar index would suggest that many people are believing it. As of the close, the DOW was up 287 points. The Fed is set to make its upcoming policy statement on June 20, and the "buy the rumor" crowd appears to be in full effect.

For the next few weeks, expect traders to hang onto every word spoken by policymakers, and volatility on a day-to-day basis should be elevated. Without a great deal of economic data on tap between now and the Fed meeting, you would have to think that we'll remain range-bound until then. What will be very interesting to see is if another round of easing is announced, whether or not the markets will rally further, or those that were anticipating this announcement will take profits and drive the market lower. Until then, it is prudent to maintain a large cash position until the market shows its hand.