The reversal in miners yesterday set off warning bells so we took profits on our long positions. Why? Because as I’ve said before the banks control this sector. One of the strategies they use before a big move begins is to manufacture an undercut. It panics longs and creates a stop run so the banks can scoop up multi million dollar positions without running the price up.

And based on the Bollinger band squeeze I think we have a big move coming. Maybe one to rival the baby bull rally. The banks are going to make sure they are fully loaded before that begins. They employed the same tactics right before the baby bull. They manufactured an undercut in the mining indexes that created a selling panic as scared longs started looking for another leg down. Instead the banks scooped up their shares and ounces at the very bottom and then released the sector into the baby bull rally.

These are the kind of things one has to be prepared for in this sector. The SMT metal portfolio just racked up a very nice 7% gain in two weeks and is sitting at all new highs ($508,000) and now we can wait and see if an undercut is coming. If it is we will be buying at the bottom instead of panicking and selling like everyone else.