The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.


The FRED Report

) -- Since last weekâ¿¿s newsletter, the market has declined -- and more quickly than we would have expected (

weekly video commentary here

). But, the decline has been orderly, and not a crash as some people have suggested. Why do we say this? Well -- during, for example, the crash of 1987, the Dow Industrials moved from roughly 2700 to 1700 in the following manner. From Aug. to Oct. 16 the Dow fell from the 2700 area to 2200 area, and then fell 500 more points on the 19th alone. If this were to happen now -- from roughly 10000 -- it would be a one-day decline of around 2200 points. We do not want to minimize the recent drop, but at the same time, historical perspective is important.

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On Wednesday,

we alerted our clients

to a rather unusual technical formation known as an ⿿inside day,⿝ where the high was lower than the day before, and the low higher.

This can often be a trend change day and indeed, this may have occurred as the market rallied on Thursday


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Should the market act normally,

we should continue the rally up into the 120 area on SPY and then drift down again in a retest of the lows

. We would expect this to be weeks in duration but the moves have been happening more quickly. We will watch with interest. But, as a measure of extremes, we recently had a down day where all five hundred of the stocks in the SPX were down. Thus, there is some more oversold to resolve even if this rally fails.

We have noted in past articles that our favorite area of the markets is commodities, but gold is a bit ahead of itself, and we have moved to an underweight on GLD (GLD) - Get Report at 169

. Silver

(SLV) - Get Report

has been lagging which is healthy for the metals markets long-term. We have a new 12-month target on GLD since our objective of 169 was hit. We have advised selling some gold to rebalance portfolios back to a normal weight. For those who want to diversify metals, a move into the mining ETF PSAU


is an interesting play. We show charts of these below.

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Next week is options expiration and should be interesting and hopefully less volatile than this week has been. We encourage investors to stay with their long-term investment plans through this volatility.

Fred Meissner is founder and publisher of

The Fred Report

. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.'A detailed bio is here:

Fred Meissner