If everyone is long equities and thinking the Fed will be dovish and continue to talk back the taper, how can markets continue higher tomorrow after the FOMC announcement? The answer is they can’t, UNLESS the Fed offers the prospect of QE-infinity for longer OR an INCREASE in asset purchases.

So unless the Fed surprises with an even MORE DOVISH than expected announcement, everything (bonds, equities, gold, etc.) is set for a sell-off.

Transports became even more extended to the upside this morning, thus far we are seeing a dreaded “black candle” forming:

IYT Daily

IYT_Daily_10.29.2013

Sector ETFs don’t get much more overbought and overextended than IYT is here – risk is decidedly to the downside.

Meanwhile, there is a major battle taking place in gold around the $1350 level:

Gold_Daily_10.29.2013

Given the importance of both the $1325 and $1375 price levels, there is a very good chance that the next $25 move in gold will be in the same direction as the next $100 move.