1. AN INCREASE IN VOLATILITY

After weeks of little volatility, sharp gyrations suddenly surfaced, a warning signal of a change in direction, especially at major tops or bottoms. There were three separate days of more than 100 points in the Dow including two down days over 150. The VIX volatility index, which had fallen to levels last seen right before the collapse of the market two years ago, jumped sharply, again an alert that things have changed.

2. OPTIMISM HELD UP

Even though stocks suffered two serious daily declines, the market still was up three of the five days and had opened higher three of the 5 days. In spite of the cracks, optimism stubbornly held its ground.

3. THE SENTIMENT INDICATORS DETERIORATED

The weekly AAII and the Investors Intelligence polls continued to reflect a high confidence. The mutual fund cash position is now at the lowest level in history, even though there might be some extenuating reasons for this. The Rydex cash flow numbers are now bearishly off the charts. My interpretation is that the public which had been skeptical was now convinced that the economy was in recovery mode and it was payback time. This new confidence also became evident in the very bearish put call ratios. At the beginning of the week, they rose to levels last seen at the top of 2007. It seems as though the public has once more slyly bought the top.

4. THE EVIL ALLIANCE--GOLDMAN SACHS AND JP MORGAN

Goldman, which took a hit on the announcement of the hearings two Fridays ago, snapped back only to sink precipitously this Friday. The same went for JP Morgan, which significantly is by far the largest derivative player, or more accurately, market manipulator in the world. Should they both break down simultaneously, as I suspect, it means that the jig might be up for their illegal shenanigans, and nothing good awaits the markets. But I don't want you to think that they have run out of ways to make money in the worst of circumstances. Right now might be considering packaging the collapsing commercial real estate by turning them into boutique jail cells for their very own felons. It is the foundational tenet of GATA that Morgan is the primary suppressor of gold and silver through their pervasive derivative maneuvers. Which brings us to the next point.

5. GOLD MOVED UP

Two Fridays ago, when it was announced Goldman was going to be grilled by our savvy legislators (the very same solons who pushed through the laws that GS and JPM gratefully abused) gold dropped $20 within minutes. The media attributed this panic to the GS-John Paulson connection. But this reaction was just another example of a true bull market in effect for in contrast this Friday, after it was announcement that GS will be investigated for possible criminal acts, guess what? Gold went up not down, and is now $45 above that panic bottom of two weeks ago. Also impressively, the largest gold stocks moved up smartly (5% for the weeks and 7% off the GS-Paulson bottom) as the market started to reel. The at the hip connection between the stock market and gold seems to have been severed. (See the comments below on Newmont.)

6. THE BOND MARKET STRENGTHENED

Bonds turned up sharply this week indicating that there is now a shift coming out of stocks and into the apparent safety of the bond market. Eventually, this sector will also fail, as the governments of the world attempt to sell their massive debts to pay for the perpetual bailouts.

7. THE CHINESE STOCK MARKET TURNED DOWN. Another scary chart below is the Shanghai market. After resting at the same level for nearly 7 months, the Shanghai Composite appears to be breaking down. This can't be good news for those who believe that China is immunized from any economic decline.

MY CONCLUSION

I have a strong sense that next week will prove to be a dramatic one in the markets. There is something large bothering the financial markets. I don't know if it is the unfolding European crisis, the possible revelations coming out of the Goldman investigations, a sudden fiscal crisis in a U.S. state (pick your location,) something out of China (look again at that chart) or just something more mundane such as the market falling by its own weight. Bear markets begin unannounced and usually when optimism and positive headlines are prevailing. As we saw in the recent front cover of Newsweek ("America Is Back",) the mainstream media seems to be in, also.

One my favorite scriptures for these times is, "the prudent see danger and take refuge." Proverbs 27:12 To me that means Jesus, a shelter from the storm, but in our material world it would be to get my financial house in order, to be out of stocks and into gold and silver here. The scariest scenario I can see would be a concomitant plunging of stocks along with an explosion in the price of gold. That could mean something uncontrollable has come finally come and if you look at the charts below, that is what could be happening.

PUTS STILL ARE AN EXCELLENT RISK PLAY

I had recommended puts as a limited risk play on the possible decline, but only if gold and silver hold a central place in your finances. Last week the puts did move up, but because of their inherent time premium, not dramatically. I expect that to change this week. The May series is still very viable, but to be prudent a combination of May and June would be best. It's very possible that an announced Greek solution might provide the Monday early pop to give you the best prices to get in or back in. Obviously, I like the odds here and if stocks really tumble, there will most likely will be a bounce or two and a possible powerful snap back at the bottom. These would be calculated trades but if it happens as I think you can take some profits and put them away.

UPDATED CHARTS, PLUS TWO MORE

I have updated last week's charts and added another important company, the revered Berkshire Hathaway. To many Berkshire is the ultimate long-term success stock and it is well deserved. But right now it looks to me as though Mr. Buffett should have sold some of his vast holdings and put them into silver, as had been rumored years ago. Also, it is foreboding not just because of Mr. Buffett's reputation as the ultimate long-term investor, but because of his direct link to Goldman.

All of these charts continue to visually portray a market that is staring at real danger. They will give you a visual view of what is unfolding. You don't have to be creative to see the similarity in the charts of these critical companies.

Finally, I have also added Newmont Mining, the most significant of the larger gold miners. Newmont is very near a 15 year high ($61.) The reason I think it is significant is that Newmont has lagged most of the other miners all during the past decade and now, as its fundamentals have greatly improved, it is displaying a massive potential inverted head and shoulders. My expectations is that it and the other gold shares, after teasing us for almost 9 years, are ready to finally blast off into orbit. It may require a bottoming of the stock market first, but it should be soon, and we should not have to worry about them swooning as they did in 2008 and 2009. But if the shares blow out as the stock market collapses, we might be into something totally uncharted.

CAN YOU GOOGLE "CRASH?"

WHERE IS SUPPORT?

IT MIGHT BE JAIL TIME FOR OUR FINANCIAL ELITE

HAS THE LONG-TERM APPROACH RUN OUT ON MR. BUFFETT?

SHANGHAI STOCK MARKET LOWER AGAIN THIS WEEK

THE ULTIMATE BREAK OUT? NEWMONT MINING

If you are interested in which indices might be best for this event and wish to talk about things based upon the honor system I mentioned last week, just get back to me and we can talk. Obviously I believe this is an exciting shot.

Chuck ikiecohen@msn.com