Or perhaps the "taper" talk is just a failure of Fed communication. The Fed was the one that started it and now it has to fix it, fast.

Two scenarios before the FOMC meeting on June 18-19:
  1. New economic data strongly and consistently support the hypothesis of strong economic recovery, therefore driving the inflation expectation back up to 2.3% or higher. Given the decidedly mixed data so far, this is unlikely. But in this case the Fed may not do or say anything drastic.
  2. Mixed economic signals continue, inflation expectation stays below or fluctuates around 2%. This is likely, and the Fed would have to tighten the leash and stop the taper talk quickly. Some encouraging words, meaning a pessimistic outlook in today's world, may be said.

Considering the aforementioned recent market trends, and if you agree with my assessment of the probabilities of the two scenarios, it may be time to keep close watch of forthcoming economic data and buy the dip, gradually, in Treasuries and gold.

Or, if you want to wait, at least keep close watch of forthcoming economic data and get ready. Buying the dip in stocks is more risky -- as mentioned earlier, Fed words and even action may no longer be sufficient to boost confidence in the economy at this point.

International developments, perhaps now more than usual and especially from Japan and Europe, will also be crucial factors. Here's one bullish thing for Treasuries: new Chinese President, Xi Jinping, will visit the U.S. in June (exact date yet unknown but he's in Latin America now). Unless his meeting with President Obama turns out to be a disaster (highly unlikely), China will continue its recent increased pace of purchasing U.S. Treasuries.

At the time of publication the author was long GLD and TLT.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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