Gold has just entered its strongest time of the year, embarking on a major seasonal rally.  Naturally this is very bullish for not only this metal, but the companies that wrest it from the bowels of the Earth.  Gold’s well-established seasonality is important for speculators and investors to understand, as it offers many great insights to help fine-tune the timing of precious-metals-related trades.

Technical, fundamental and seasonal influences point to another volatile period for equity markets around the world this week. Economically sensitive sectors are following their seasonal patterns. However, most sectors remain short term overbought after huge moves since October 4th. Preferred strategy is to accumulate economically sensitive equities and related ETFs on short term weakness, particularly if they benefit from favourable seasonal influences.

Ed Note: A sample of the 45 charts Don analyses and comments he posts:

The S&P 500 Index gained 10.62 points (0.85%) including 24.15 points on Friday. Intermediate trend is neutral. Resistance is forming at 1,292.66 and near its 200 day moving average at 1,272.27. Short term momentum indicators have rolled over from overbought levels and are trending down. Short term downside risk is to its 50 day moving average at 1,200.78.

The TSX Composite Index fell 131.40 points (1.06%) last week despite a gain of 167.98 points on Friday. Intermediate trend is down. Resistance is forming at 12,541.84. Short term momentum indicators have rolled over and are trending down. Strength relative to the S&P 500 Index remains negative. The Index bounced from near its 50 day moving average currently at 12,078.56.

The U.S. Dollar Index gained 0.78 last week. Intermediate trend is up. The Index remains above its 50 and 200 day moving averages. Resistance is at 79.84. Short term momentum indicators are overbought, but have yet to show signs of peaking.

Crude Oil gained $4.79 per barrel (5.07%) last week on growing concerns about a disruption in crude oil production in Iran. Intermediate trend is up. Crude moved above its 50 day moving average last week and is approaching resistance at $100.62. Short term momentum indicators are overbought, but have yet to show signs of peaking.

Gold gained $33.10 per ounce (1.88%) last week despite strength in the U.S. Dollar (an encouraging technical event). Nice bounce from near its 50 day moving average currently at $1,726.65. Short term momentum indicators are overbought, but have yet to show signs of peaking.

…..more than 45 Charts analysed HERE

Well, we’re certainly seeing plenty of action, aren’t we? Of course, the big news behind all the markets right now is still Europe. The crisis is rapidly worsening, with there now being a very high probability, as I’ve said all along, that Greece will default and exit the euro to bring back its currency.

In addition, the contagion is now hitting Italy, whose bond market is collapsing, despite the firewalls that were agreed to just a couple of weeks ago by European leaders. So the euro is now taking a shellacking again.

Mark my words: The European debt crisis is still in its infancy! In the weeks and months ahead, here’s what you can expect …

• Further market losses in the sovereign bonds of Italy, Spain, Portugal and even France.

• Further losses in the value of the euro currency.

• More crisis summits by European leaders that basically end up with nothing more than they’ve generated all along: A lot of hot air, no details, and a very stubborn attitude toward keeping the euro in place, at virtually all costs, even at the cost of a widespread depression in Europe, and rebellions.

Also, expect Greece to default and take back its currency, and new resounding calls for Italy, and perhaps even Spain, to start considering the same.

But also mark my words on this: AS BAD AS THE CRISIS IN EUROPE IS GETTING, IT IS GOING TO PALE IN COMPARISON TO THE U.S. DEBT CRISIS WHEN IT GOES FULL TILT, PROBABLY LATER NEXT YEAR.

AND AS I’VE SAID ALL ALONG, ALL THIS WILL ULTIMATELY SPELL NOT JUST THE DEATH OF THE EURO CURRENCY, BUT OF THE DOLLAR AS WELL, AND EVENTUALLY, THE NEED FOR AN ENTIELY NEW GLOBAL MONETARY SYSTEM.

Right now, we must also keep in mind that no matter how short-term bullish many markets may sometimes appear, we are in crisis mode, and the big surprises will be to the DOWNSIDE.

We’ve just seen it in stock markets, which despite their rallies over the last two weeks are now turning down sharply. The same thing is now starting to hit again in the commodity markets, where gold, silver and many other commodities are beginning to also roll over again.

So let’s now go right to the charts. FIRST UP, none other than GOLD.
As you can see from the chart of gold below, gold did indeed manage to rally back to the $1,800 level, just as I expected. However, given all the bad news, wouldn’t you think gold should be trading much higher, near or even at record highs?

Well, it’s not and the reason is fundamentally the European crisis is causing savvy investment money to go to cash for safety, even to the U.S. dollar, rather than any investing at this time.

So the pressure is still on gold, and once you see it fall back below this uptrend line here with the red arrow, I believe you’re going to start seeing gold slide to at least the $1,500 level and very possibly, much lower. The bottom line is you should hold long-term gold, but refrain from adding any new positions or trading the long side on a short-term basis.

Next, silver. Let me preface my comments on silver with full disclosure. I am personally SHORT the silver market AGAIN, as I believe another devastating crash in silver is about to begin. And this time, it could prove to be even worse, with a plunge from the $34 level down to the $25 level and lower in the cards.

Fundamentally, there is simply no way, in my opinion, that silver is headed much higher when most big money is moving to cash and when the industrial uses of silver are certainly hitting some speed bumps as Europe and U.S. economies slump heading into this crisis.

In addition, all of my cycles and technicals on silver are BEARISH. Here’s the latest chart. You can clearly see that silver did not even rally as much as gold did over the last couple of weeks and now, it’s already turning back down. Notice how silver remains well below the two downtrend lines, noted by the blue arrows, and even below a more minor downtrend line.

Also notice where the bottom of the current channel is, down below $25. That’s the path I soon expect silver to head into, and a very sharp decline, which can begin at almost any minute.

Silver Preparing For Another Crash

Now, let’s go to the U.S. dollar. Naturally, as cash leaves Europe and heads down a rabbit hole for safety, it’s going to cash, and since the dollar is still the world’s reserve currency, that means the dollar’s value is rising. You can see it in the chart of the Dollar Index.

After testing extreme support, the dollar started a sharp rally that just recently broke through the upper side of the declining trend channel. While the dollar will suffer some pullbacks, everything I monitor tells me that the dollar is going to rally more now, probably up to the 81 to 82 level in the Dollar Index. Now, keep in mind, this is a short- to intermediate-term move in the dollar. The long-term trend for the dollar is still MUCH lower. That has not changed.

Now let’s go right to the Dow Industrials. Yes, the bounce in the Dow back up to the 12,187 level surprised even me but resistance has held strong at that 12,200 level and now the Dow is squarely back on track for lower prices. I still fully expect we will eventually see the Dow 9,000 level in the weeks and months ahead, but keep in mind the stock markets now are going to swing as wildly as commodities or currencies do.

Take a look now at the chart of the Dow Industrials. You can see the latest rally and how it stopped dead at the lower end of my system resistance channel, which spans from 12,200 up to 12,800. That’s a massive roof of overhead resistance, and I believe that the test of that roof is now complete.

Now, the market is turning back down, and quite frankly, there isn’t much in the way of system or technical support until the Dow gets back down the 10,400 level which is a critical level, as I’ve noted for you previously. Once that level gives way — and I DO expect it to give way — then the Dow will be on a path that will bring it down the 9,000 level.

So right now is NOT the time to be heavily invested in stocks. Instead, I recommend sticking with my recent recommendations for speculative positions using inverse stock ETFs.

That’s it for today. As always, please stay tuned to any of my specialized publications you subscribe to for more frequent and detailed analysis and recommendations!