Equities - In my update of June 25, I said that the equity markets should be okay because falling bond yield should support stock prices. Well, by Wednesday morning it looked like I was going to be dead wrong as the TSX was down 500 points for the week. However, at the time of writing today the TSX is actually up 48 points since last Monday and the US markets are up approximately 1.5%, so I think that qualifies as "okay." On Friday, June 29 I wrote a special update suggesting that the markets should have a short term bounce since the short term oscillators turned up and that bounce is happening as we speak. However, the long term oscillators still have not turned up. This needs to happen if the markets are to move higher. Markets typically have a peak in mid-July and late August before declining into October so we could see a longer rally this time compared to after June 13. Often these rallies move the markets higher but fewer and fewer stocks participate in the rise. This is a sign of weakness and potential trouble ahead. Rising interest rates around the world, the longest rise ever in the US markets without a 10% correction and problems with sub prime mortgages are serious concerns. In fact, it appears that Standard & Poors Bond Ratings have purposely not updated the ratings on these sub prime loans to reflect the deterioration in quality. This would temporarily protect the hedge funds and financial institutions from further problems such as Bear Stearns experienced. Eventually this is likely to lead to heavy losses when prices are adjusted to reflect their true, reduced value. Tread carefully!

Bonds - US 10 year bond yields dropped to 5.03% Friday so the buy signal given by the long term bond oscillators weeks ago has been accurate. This trend could continue for some time.

Gold and other commodities - Gold and some other metals are very oversold and could begin a new rising trend in a week or so.

Gold stocks - Long oscillators for the TSX Gold Index turned up two weeks ago and has had a rare double bottom, delaying a new up trend.

Canadian dollar - Still appears to be peaking. The Loonie is highly correlated to the price of oil so high oil prices could keep the CAD dollar strong.

The long term oscillators for gold, copper, and aluminum turned up today from very oversold levels that typically produces a new up trend lasting from three to six months. The oscillator for the TSX Gold Index (gold stocks) turned up several weeks ago but did not make much headway. This should light a fire under them. This is positive for resource companies and the TSX Index.

One week ago, I wrote that investors should "go for the gold" since the long term oscillator turned up from a very oversold level. This also occurred in 2003 and 2005 which were followed by major rises. The gold stocks have had trouble getting started and as you can see the oscillator has had a rare double bottom. No indicator is perfect and this does happen from time to time. The signal is usually accurate, it just takes a little more time to consolidate before the move take place. Gold bullion and many other metals are now oversold and could turn at any time so perhaps they will move up together. Time will tell.

The long term oscillator for most all equity market averages look similar to this one for the TSX - declining from an overbought level. As you can see by looking at the past history, the markets can stay overbought for some time. The oscillator frequently turns up once or twice before dropping all the way to a fully oversold position. If these oscillators do not turn up, short rallies could fizzle and the risk of a longer/more severe decline increases significantly.

In the update of June 29, I included a chart showing that the SP 500 short term oscillator had turned up the way it did on June 13. Immediately after the June 13 update the markets experienced the biggest rise since March. On June 29 I mentioned that the TSX oscillator had not turned up yet but it usually follows the lead of the US markets. As you can see that happened today. While US markets were down slightly Friday they rose close 1% today and the TSX rose 191 points on Friday. (The TSX was closed today for Canada Day.) These upturns suggest that the markets should have a bounce for at least three days or so. If the long term oscillators do not turn up then this rally could eventually fizzle. The recent market action is typically of what often occurs at the end of a long market rally we have just experienced. One should be careful if the long term oscillators do not confirm this rally.