I go out for lunch and return to a bevy of reports including two from Merrill Lynch on the precious metals.

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Download June 12 ML Report

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Download June 9 ML Report

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In addition, I see that the Deutsch Bank "MACRO MODEL IS STILL LONG". I happen to be in cash, but my thinking is not far removed from DB in that we both think a summer rally is in the cards.

Here is a key Deutsche Bank strategy report. It dates back to May 22, but other than hearing about their bullish opinion this weekend on the golds, I haven't heard any change on their part. Download DB Asian Macro Strategy report

The DB Research Department is stating that "Markets have sold off because the macro environment is deteriorating but our macro model suggests markets will soon acclimatize to weakening growth and focus instead on potential Fed easing. This should drive a short squeeze and set the base for a final rally."

As readers already know, I am calling for an easing by the central banks right after they think they manage to get the carry trade and commodity speculation issue under control. That easing will be in the form of lower interest rates. The timing here is crucial for traders because this will continue to be a rather volatile period.

You see, I think the lowered rates will be partially in response to a falling equity arket, and the damage being done in real estate markets. But the talk of lower rates will be what moves equities higher for a short period.

The "Summer Rally" will be a time to exit all low quality stocks from your portfolio, and to take advantage of the rally in precious metals. It will not be a time to relax, thinking that the Bull has returned.

Let me tell the dreamers something; the Bear just arrived. If you are long stocks, she has only partly eaten your lunch.

Like Deutsche Bank seems to be saying, I will call this coming rally a correction in a bear market. It will likely be a modest one, but if you are well positioned for a trade of 10 to 20 pct over the period of a couple months, you could do quite nicely.

The NEXT pull-back in equities will most likely be the BIG one. The timing could have something to do with the FOMC decision on August 8 or more likely September 20.

It could be that the FOMC raises by 25 basis points on June 29 but gives guidance that they expect that will possibly be the last hike. Then the market will recover.

If it recovers moderately and the economic data appears to show inflation back in the Fed comfort level, then on August 8, the FOMC would pause. After that there is likely to be a problem because by September 20, traders would be demanding a rate cut, and failing that, I believe the sell-off would begin in earnest.

September 21, 2006, might even come to be called Black Thursday.

That's the timeline. It's pure conjecture. But if there is anybody out there with a clearer crystal ball, please tell me who you are.

In the meantime, I think there is a big trade to be made in precious metal stocks, and I see that Merrill Lynch is bullish there too.