With the situation in Ukraine reaching a fever pitch, gold has surged back above $1315 this morning:

Click to enlarge

GC_Hourly

Russia appears to have every intention of destabilizing Ukraine to the point of provoking an all out civil war which will give it the cover to enter the east under the auspices of "peacekeeping". Gold should continue to benefit from the mounting tensions in Ukraine, whereas, equities remain extremely vulnerable after nearly making fresh all-time highs again last week:

SPX_Daily_5.5.2014

Small-caps continue to underperform amid a bearish sector rotation and the all-important Dow Transports exhibit a classic broadening top pattern:

Transports_Daily_5.5.2014

We will be looking for two key market moves over the coming days/weeks: 1. Gold to rally back above resistance near $1350 2. The S&P 500 to put in a weekly close below 1800 - should both of these occur we should have a very interesting summer across markets with volatility likely to be the underlying theme. With the VIX still extremely subdued, long volatility trades are more attractive than they have been in a very long time:

VIX_Daily_5.5.2014

It is far from unreasonable to expect the VIX to spike above 20 at some point in the next couple of months. After all, it's happened every summer for the last 8 years.......