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August has been a pretty terrible month for the market. The selling pressure has been persistent. And investors -- many of whom are enjoying vacations and warm beaches -- just don't seem to care.

Since peaking at 15,658, the Dow Jones Industrial Average ($INDU) has gone on to lose more than 5%, returning to levels seen in April. The bond market continues to get hammered, as well, as interest rates drift higher. The only area that's been enjoying a surge of buying interest has been precious metals, with silver, in particular, showing some verve.

I first warned of trouble in a blog post on Aug. 7, when the Dow was above 15,500, the economic data was strengthening, and investors were still feeling pretty good. Concerns included a breakdown in market breadth (as fewer and fewer stocks remained in uptrends), trouble in the foreign-exchange market and growing suspicion that the Federal Reserve would pull back on its ongoing $85 billion-a-month bond buying stimulus.

But now -- with the market oversold, sentiment bombed out and some recent economic data disappointing (home sales and durable goods) -- what should investors expect in the months to come?

Hurdles to clear

The market is preoccupied by three big events on the horizon. The first is next month's Federal Reserve policy decision which, for a while, the market expected to be a $10 billion to $15 billion tapering of its "QE3" bond-buying program. But now, with some softness emerging in the housing market (a consequence of the increase in 30-year fixed mortgage rates from 3.4% in January to 4.6% now), the Fed  seems to be backing away from taking action in September.

Anthony Mirhaydari

Anthony Mirhaydari

Last week's release of minutes from the Fed's July policy meeting revealed concern over higher mortgage rates, higher oil prices, slower growth in key export markets and the potential for higher taxes and/or more spending cuts.

That brings us to issue No. 2: the looming fiscal fight over the debt ceiling in Washington. Once again, Republicans and Democrats will battle over issues such as Obamacare, taxing the rich and entitlement programs under the specter of a government shutdown and a possible default on the national debt. Earlier this week, the U.S. Treasury announced that, as extraordinary cash management tactics are exhausted, it will hit its debt limit at some point in the middle of October.

Without a timely increase in the debt ceiling by Congress, we could be looking at a repeat of the market chaos seen in August 2011 after the U.S. credit rating was downgraded. The House and the Senate will have just nine working days in September to sort things out -- so expect a short-term deal to push the debate into the holiday season.

And finally, the war drums are beating over Syria's alleged chemical weapons attack, with the Obama administration pledging to take action. I can't say how all three of these hurdles will be resolved. My hunch, based on the stimulus-leaning tendencies of the Fed lately, will be for any tapering to be pushed back until later in the year. But the other two are true wild cards. And that's why people are so nervous and selling into the uncertainty.

Signs of a bottom

But at some point, the bad news and uncertainty become priced in. Expectations fall so low that, barring a confrontation with the Russians or Iranians over Syria or a fistfight between President Barack Obama and GOP House Speaker John Boehner, an upside surprise becomes more and more likely.

We may be approaching that point now.

Various technical measures are forming important lows, including the relationship between new highs and new lows on the New York Stock Exchange, as shown below. That measure has fallen to levels associated with the turnarounds in June and last November. While the measure fell even lower during the August 2011 market wipeout, it's in deeply oversold territory.

NYSE high-low index

And while a few economic reports have been soft, overall the trend is higher, with the data surprising to the upside -- versus analyst expectations -- on a scale not seen since late 2012. And it's not just happening here at home. Global economic activity is rebounding, with the eurozone exiting its recession that began in 2011 and China's manufacturers showing renewed signs of vitality. Credit Suisse believes the bounce in China will continue, as housing policy is easing, local governments are investing again and the export market has firmed up.

So, what should investors do in response to this mixed outlook?

It's probably too late to position yourself defensively if you haven't already. If you didn't sell in early August, selling now would likely leave you more vulnerable to missing a market rebound than it would protect you from continuing price declines. If this applies to you, and you're a conservative investor, the best advice is to hold steady.

If you're more tactically focused, the action has been great in the precious metals and the related mining stocks. VelocityShares 3x Silver (USLV) climbed 51% after I added it to my Edge Letter Sample Portfolio on Aug. 12; Lake Shore Gold (LSG) rose nearly 50%; and Golden Star Resources (GSS) advanced more than 20%.

With inflationary pressures building, global growth strengthening and the Fed easing away from tapering, I plan on adding exposure in this area on any pullbacks.

And if you're a hard-bargain seeker, keep an eye on beaten-down materials stocks -- especially steelmakers -- which should be doing much better in this environment, given the economic tailwinds.  I'm watching stocks such as Russian steelmaker Mechel (MTL) for entry points on an upside breakout.

Overall, stay nimble and prepare for a busy autumn. After an easy, Fed-fueled melt-up to start the year and a relatively drama-free slide this summer, the market is going to be a much more volatile -- and more exciting -- place to be as 2013 comes to a close.

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Disclosure: Anthony Mirhaydari has recommended USLV, LSG, GSS and MTL to his clients.

Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at anthony@edgeletter.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.