IN THE ROLLER COASTER RIDE OF THE EQUITY MARKETS, THE US MARKETS ARE IN THE LEAD CAR CLIMBING THE HILL PULLING OTHER MARKETS HIGHER. THE TSX IS IN THE LAST CAR APPROACHING THE LOW AS GOLD AND OIL PRICES PLUMMET.

The long-term oscillators for the US equity markets turned up on July 21 when the headline for the update said that the "SPRING HAD SPRUNG." So far, after three weeks of volatile trading, those oscillators have indeed been accurate in pinpointing the end of the decline that started in May for most global markets. While the SP 500 is up 2.8% since July 21, the TSX has declined 1.3% (both figures as of Friday's close) as falling commodity prices hurt the resource sectors that had been strong for so long. On July 18 a special update showed that oil prices should decline and last week's headline stated that "INDICATORS SUGGEST THAT GOLD HAS JOIN OIL'S DOWNTREND." Last week gold prices fell 6.6% from $897 to $852 and oil prices continued to fall, losing $10, or 2.9% as prices fell from $125 to $115. A month ago, some of the analysts at major New York investment dealers said that oil prices were going to be at $170 by now. After the prices often move in the opposite direction. This happened with US real estate, with the Canadian dollar after it reached par with the US dollar last fall and has happened again with oil prices.

According to Stephen Leeb's strategy for oil, (in the June 10, 2008 special update for oil) equities should be sold when oil prices rise more than 80% in one year, (which happened when oil rose above $125 per barrel) and bought when they have risen than 20% in twelve months. For oil prices to be up only 20% in the last twelve months, oil would have to fall to $89 this month, to $98 in September, $110 in October or trade at $118 in November. At today's price of $115, oil prices are now up only 20% for the calendar year. The decline in oil from the peak of $146 on July 11, is very positive for world economies, even those that are net exporters. Rapid, huge changes in prices for any product usually ends up being a negative for all concerned.

The SP 500 rose 2.8% last week while the TSX lost 1.1%. As was mentioned last week, as long as the US markets are in an up trend, the TSX and other global markets just about always follows along in due course. The long term trend charts have turned positive for the US Small Cap market averages and the Volatility Index. This still needs to happen for the SP 500, DJIA and the Banking Index to indicate that this is not merely a bear market rally. The TSX is lagging behind due to the heavy resource exposure but the long-term oscillator appears poised to turn up this week which means that the gold and oil stocks could be near a low, even if commodity prices continue to lose ground.

Bonds - Prices continue to stay in a narrow range.

Commodities - Gold and oil prices are into the oversold range but could still decline more.

Currencies - The long-term oscillators for the US$ turned up on July 28. Since that time, the US$ has been very strong compared to the CAD$ and the euro. Last week, I mentioned that the long-term oscillator for the euro indicated that it may have finally peaked against the yen. That was confirmed as the euro lost more ground last week.

The SP 500 will have to rise another 2% or so for the long-term trend chart to turn green/positive which will reduce the changes of this being a bear market rally.

The long-term trend charts for the US Small Cap stocks have turned green/positive.

The US Banking and US Financial Services Indexes have been red/negative for over a year now. If these trend charts would turn green, it would indicate a significant improvement compared to other rallies.

The trend chart of the Volatility Index has turned red for only the second time in a year and a half. In this case, turning red is positive for equities since it indicates that volatility is in a down trend. Peaks in volatility happen to market bottoms. Notice that volatility was less this time than the previous four occasions.

The long-term oscillator for the TSX is curving at the very oversold level. This often happens just before it turns up. Hopefully this week will mark the low for the TSX before it follow the SP 500 higher.

The long-term oscillator for gold stocks are now in the fully oversold range but still need to turn up before the coast is clearer.

Energy stock are very oversold so they can turn up anytime as well. Moves at this stage can be very volatile with big down moves eventually followed by major advances.

Bonds are in a narrow trading range with the oscillator in the middle of the overbought-oversold range.

The long-term oscillator for gold is still not in the fully oversold range where lows have occurred before. This implies that gold could decline further or that it could take longer gold prices will hit bottom and turn up.

The oscillator for oil is in the fully oversold range. While it could still take longer before it turns up, like it did in late 2005 and 2006, it is in the range where it has turned up many times before.

Gold has turned red/negative for the long-term.

It would not take much to turn the trend chart for oil red either. It has been green since early 2007 when the price was close to $60 before the long up trend started.

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