The TSX lost some momentum on Monday as gold and crude oil backed off a bit and base metals stocks cooled a bit too. Some fast money investors were taking money off the table yesterday in front of this week’s events. For the TSX, the expectation of Fed QE is likely priced in and the risk of a disappointment is reasonable. While we do not expect a major correction at this point, a pullback in the overbought precious metals stocks seems reasonable. But with the Fed standing ready to provide an unlimited QE commitment, corrections are likely to be somewhat shallow relative to the declines of the past year.

The big message for the gold stocks is to buy on dips. If the Fed does not deliver a massive QE package this week, we do not think we will see one until early 2013. At this point, gold should not correct below 1630-1650 support. Anything deeper would signal a more material setback in the sector.