EQUITIES COULD CORRECT FOR ANOTHER WEEK OR SO, BUT US STOCKS ARE ALREADY AS OVERSOLD NOW AS THEY WERE IN MID-MARCH. US MARKETS ARE ALSO FOLLOWING THE SAME PATH AS THEY DID IN 1991. THIS COULD IMPLY ANOTHER 2.5% DECLINE THIS WEEK FOLLOWED BY AN 18% RISE IN THE FOLLOWING MONTH. THE OVERSOLD CONDITION OF THE MARKETS MAKES THIS FEASIBLE.

US markets gave up all of the gains made the previous week by falling 2.7% last week while the TSX declined 1.7% after closing above 15,000 for the first time last Tuesday. Oil and the TSX are due for a pause. However, even though the SP 500 is up 10% from the Mar. 17 lows, there is data which indicates that the US markets are now as oversold as they were at the market lows in the middle of March, right after Bear Stearns collapsed. For many weeks, Hays Research has been pointing out that the US market averages have been following exactly the same path as they did after the Savings and Loan Crisis correction in 1990. If this pattern was to continue, the markets would decline another 2.5% this week (after Jan. 2, 1991 the markets correct 5% in two weeks) and then rise 18% in the following month. Since the markets are already so oversold, another week of declines could realistically produce the conditions similar to the fall of 2005, the summer of 2006, and January 1991 which were followed by long, powerful advances. In January 1991 it was the US attack against Iraq that sparked the spike to higher levels. Technical and statistical data does not give an idea of what may cause a major rise, they just point out that market conditions could be developing that typically result in positive market action. Time will tell.

Many sectors have risen nicely off of the lows reached earlier this year. Now the financials need to do their part by showing some strength and doing some "heavy lifting." There are many signs that the worst of the financial crisis is over. The financials need to act in a way that confirms this. The next few weeks could be very interesting.

Bonds - The long-term oscillators for bonds turned up last week and issued a buy signal. This means that yields should decline while prices rise.

Commodities - Oil's relentless climb is forcing out short sellers. Conditions in oil and natural gas markets are just the opposite of the conditions in the US equity markets. A decline in oil prices would likely be very positive for equities at this point because the valuations of many oil stocks are based on $90 oil. The fact that oil stocks fell last week as oil continued to make record highs, shows that investors do not think that oil will stay in this price range. The oscillators issued a buy signal on gold and gold stocks last week. This week a buy signal for silver was confirmed. After a year long correction, uranium stocks have been acting much better even though the price of uranium continues to trade at the recent low of $60. It is usually safer and more profitable to find areas to invest in that have been depressed for a while and then improve, than sectors that are making news headlines with record highs.

Currencies - The CAD$ still looks stronger than the US$. The US$ showed some strength against the euro two weeks ago, but it maybe just another "dead cat bounce." The euro seems to be stabilizing versus the yen.

Catch the trend.

The long-term oscillator for the Volatility Index turned up from a very oversold position implying that risk has increased. Corrections occurring early in a new long-term up trend are usually minor. What happens in the next few weeks could clarify for the masses if this is a new bull market or bear market rally.

The short-term oscillator for the Volatility Index is already more than half way to the overbought range so it could be there by next week. It would be very positive if the VIX can stay well below the high levels reached in August 2007, January and March.

The long-term oscillators for most markets have now peaked after a two-month rise. However, the oscillators should be used primarily for buying, not selling. They can, however, at least indicate that a pause is due.

The long-term oscillator for the TSX has also peaked. As you can see, the markets have often continued to rise when this has happened before. This is why they should not be used for selling. It usually indicates a pause in the up trend.

Bonds appear oversold and ready to rise in price even though inflation concerns are mounting. It turned up issuing a buy signal last week.

The long-term oscillator for gold and gold stocks turned up last week issuing a buy signal.

The long-term trend chart for gold stayed green during this correction, confirming that this was merely a normal correction in a longer-term up trend.

Last week the oscillator for silver had bottomed, but not turned up yet. This week it followed the action of the gold oscillator by turning up. This indicates that the worst-case scenario has been factored into current prices. Sometimes there can be a double bottom.

The long-term oscillator for oil has peaked but oil keeps on gaining without a pause so far. It is much more difficult to know when to sell than when to buy.

The oscillator suggests that the CAD$ should move higher relative to the US$.

The US$ has had another half-hearted rally versus the euro. It may be coming to an end unless there is more upside this week.

The euro seems to be staying in its trading range with the yen.

Data supplied by

TECHNICAL INDICATORS INCLUDED IN THE WEEKLY UPDATES HAVE ACTED LIKE A ROAD MAP, GUIDING INVESTORS TO TAKE ADVANTAGE OF THE PATH TO ALL-TIME RECORD HIGHS IN THE S&P/TSX.

In spite of all the market volatility and negative news that bombards us everyday, the markets have again climbed the proverbial wall of worry. While the SP 500 is up over 11% since the Mar. 17 low, the TSX has risen 22% from the Jan. 22 low by reaching all-time record highs of 14,666 today. While many are perplexed about how this could happen in such an uncertain environment, the indicators and comments included in the weekly updates have been providing a rationale for this strength throughout the rally. It is another example of why it is so much better to rely on technical indicators that tell you where the money is flowing, rather than on news, opinions, and statistics which explain what has happened in the past. It is like a tourist entering an unfamiliar city. The tourist can either look in the rear view mirror, or at a map. While a map does not predict the future, it shows us where we are and where we are heading. It is the same with technical tools illustrated in these updates. They don't tell us where the markets will be three or six months in the future, but they at least tell us where we are in the cycle, and what the trend is likely to be. Once again, they provided a clear signal that the worst-case scenario was factored into current prices some time ago. Since most people that wanted to sell had already sold, this meant that the only way the markets could go was up.

While the dismal performance of the US financials has hurt the performance of the US market averages, the TSX has continued to outperform global equity markets. These updates have been recommending to invest primarily in Canada.

While a short-term pause or consolidation could occur at any time, there seem to be few signs of any longer term trouble for the time being. However, the resources could pause while the financials catch up.

Bonds - Bond prices are still weak according to the long-term oscillators.

Commodities - Gold and silver prices look they are building a base since the oscillators have not turned up yet. The Feb. 11, 2008 Oil chart showed that oil had likely bottomed at $93.38. The Feb. 18, 2008 Oil chart showed that the long-term oscillator had turned up (at $96.21) and that oil likely started a new up trend. Now, almost three months later, the price of oil has been making headlines for weeks as it rises relentlessly over $120. However, as the price rises, so does the risk. While the up trend is due for a pause, it is difficult to know when or if that will happen. It is usually prudent to look for lower risk opportunities at a time like this rather than stick with an up trend too long. As copper prices had the biggest rise in history last Monday, the oscillators suggested that it was a blow-off instead of a new rise. Accordingly, copper prices drifted lower after that.

Currencies - Trends indicate that the CAD$ should strengthen compared to the US$. After a long rise, the euro should continue to correct versus the US$ and the yen.

The trend chart turned positive for the TSX on Apr. 7, more than a month before the TSX closed at a new all-time high today.

The SP 500 Index was one of the last indexes in North America to turn positive because of the large weighting in the financial sector. This shows that Canada is the stronger and better place to invest in.

The US Financial Services Index and Banking Index trend charts have been red ever since last summer when the sub-prime problems began to surface. It would be positive if they finally turned green too.

The long-term oscillators for the financial stocks still has some distance to go before reaching the overbought level. Further strength here would help the US markets, which could offset weakness in the resource sectors if that happens.

Bond prices still appear to be weak.

The long-term oscillators for gold and silver are very low, suggesting that much of the risk has dissipated. However, they need to turn up to indicate that an up trend has started. Since they have not turned up yet, it seems that a period of base-building has started.

The long-term oscillator for oil is very high. This is usually when a pause in the up trend occurs in the near future.

The long-term oscillator for copper is in a down trend, suggesting that prices should correct in spite of a record setting rise occurred last Monday.

The oscillator for the CAD$ has turned up again indicating that it should gain against the US$.

On the other hand, the euro looks like it is still correcting against the US$ and the yen.

The euro looks weak compared to the yen.

The euro would have to decline more against the US$ for this trend chart to turn red or negative.

Data supplied by

ALL INDICATORS ARE NOW POSITIVE, GIVING THE "ALL CLEAR" SIGNAL FOR EQUITIES. ACTION IN BONDS, INSIDER BUYING AND ADVISORY SENTIMENT SIGNAL THAT THE BEAR IS DEAD.

COPPER AND OIL ARE SHOWING SIGNS OF TOPPING WHILE GOLD AND SILVER APPROACH A LOW.

Is this rally in a bear market or the beginning of a new bull market rise? The opinions relating to this question have been occupying the media and minds of investors for over a month now. A successful investor needs a discipline to follow to make prudent, profitable decisions. Waiting for the consensus of investment experts and the media to change their outlook will be too late. After all the research I have conducted during my 25 year career, I believe that the long term oscillators and trend indicators (which turn red and green) provide investors with the best tools for making buying and selling decisions. Today the trend indicator for the S&P 500 and the NASDAQ turned green or positive. This follows the action of the DJIA, DJU, and US government bonds, which turned positive on Apr. 7. When all these trend indicators turn positive, a buy signal is issued for equities. I believe that investors turn negative in the future, it will signal that the rally could be over. The past record has shown that it is better to do this than to wait on the sidelines and take the risk of missing out on the dynamic rising stage of a new bull market.

While investors where frightened as the SP 500 dropped to the bear market low of 1,257 on Mar. 17, the update issued the same day was encouraging, showing that the advisory sentiment has reached the same levels as the bear market low in 2002. Since 2000, the shortest rally after this extreme was four months. That would imply that this rally could have at least another two months to go. After January, insider buying also increased to levels typically seen near bear market lows. The week ending Apr. 25 saw the most investment grade bond issuance on record as the spread between credit default swaps and investment grade bonds have fallen by 50%. The technical evidence very clearly indicates that the worst-case scenario for equities has been factored into current prices, which has put an end to the bear market.

Bonds - Government bond prices are in a downtrend as the flight to quality trade reverses and funds move back into equities and corporate paper. This confirms that the appetite for risk is getting closer to normal.

Commodities - These updates have been suggesting that gold prices have been at risk of a decline since Mar. 10, 2008 just before it reached $1,000 an ounce for the first time ever. The price of gold closed at $853 on Friday. Gold and silver have been correcting for seven weeks now along with gold and silver equities and they are now oversold. Copper spiked to new highs today but the action of the oscillators looks very much like they did for gold just before it peaked in March. Last week's update stated that oil had the potential to pause or correct in coming weeks. That is exactly what happened last week.

Currencies - The CAD$ is in limbo versus the USD$. The euro is declining compared to the USD$ and could be peaking against the yen.

Catch the trend.

You can see the small green dot on the far right indicating that the SP 500 has turned positive. To avoid being whipsawed I use many indicators together before issuing a buy signal, not just one or two.

Although it is difficult to see the green dot on this NASDAQ chart, you can see that is not red. In the past, the up trends have all lasted a long time, expect for 2004.

This advisory sentiment chart from Apr. 22 reprinted with permission from Investors Intelligence shows that optimism is increasing after reaching low levels reached during the long term capital crisis in 1998, after Sept. 11, 2001 and the bear market low in October 2002. The shortest rally after reaching an extreme low like this was four months after Sept. 11, 2001.

Government bond prices are still in a downtrend as the appetite for risk increases.

Gold and silver have reached the fully oversold levels but have not turned up yet. This indicates that the worst case scenario is being factored in. It could turn up anytime now. This could happen at higher prices.

Silver prices have also declined along with gold to oversold levels. They should continue to move together.

Gold stocks are also very oversold after correcting since mid-March.

Copper had a spike to record highs today. However, while copper has been reaching higher levels, the oscillator has been hitting lower highs. This is the same situation that happened with gold in March just before it peaked over $1,000. This could be a blow-off for copper, not the beginning of a new rise.

Oil looks to be extended and due for a pause.

The CAD$ is in limbo compared to the US$ at this moment.

The long-term oscillator indicates that the euro is still weakening compared to the USD$.

After being in a long trading range, the euro looks like it could reach another one of it's highs compared to the Japanese yen.

Data supplied by