The stock indices all closed higher Tuesday but well off their intra-day highs.  

The Dow Jones Industrial Average rose 75 points, the Nasdaq Composite was up 44 points, and the S&P 500 gained 13 points. The Russell 2000 also increased 7 points.

The S&P 500 Trust Series Exchange Traded Fund volume traded just over 72 million shares. The volume has once again become very light, and that makes liquidity an important issue.  

It wouldn't take much for the bottom to fall out of this market with very few traders participating.

According to my SST Monthly New High/New Low Index, the markets gave a weak buy signal on Tuesday with a high probability of a 30-point S&P 500 gain, including the session's 13-point gain.  

If the markets can show follow-through on Wednesday to the upside, there is a chance that the markets can give a medium strength buy signal. That signal would give a high probability of a 60-point S&P 500 gain.  

But, first things first. Wednesday will be a key trading day.

Gold and gold miners caught a bid on Tuesday as the Daily Gold Miners Bull 3x(NUGT) - Get Report gained nearly 11%.

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Gold's recent sell-off has more to do with a one-time repricing by the market based on the fact that it appears that the Federal Reserve will raise interest rates in December. This would appear to be a replay of what the Fed did last December.  

The Fed will raise rates into a slowing growth economy. The rate increase will then allow the Fed to lower rates once it realizes that a possible recession is on the horizon.  

In other words, the Fed is saving face for all the promises of raising rates that it couldn't fulfill this past year.

Look for stocks to have a huge sell-off after the rate increase in December and gold to take off to the upside just like it did last year, especially when it will becomes apparent that the Fed will need to lower rates early next year.

In sum, there are many crosscurrents in the marketplace. The presidential election is another headwind.  

Stay defensive, and make quick trades. Cash is a good position to hold, along with gold and gold miners.

This article is commentary by an independent contributor. At the time of publication, the author owned NUGT.