IT'S NOT PRETTY, BUT SO FAR THE INDICATORS HAVE BEEN ACCURATE IN FORECASTING THIS TURNING POINT AS EQUITIES CONTINUE TO MAKE PROGRESS WHILE GOLD AND OIL PRICES DRIFT LOWER.

The long-term oscillators for US equities turned up on July 21, indicating that the corrective process that began in May had ended. While financial stocks had a huge 40% rally in mid-July, and dragged other equities along with them, the DJIA and TSX declined approximately 300 points on Thursday, July 24 and 200 points last Monday, July 28 which put these indicators to the test. In spite of those down days, last week's update stated, "Don't be too concerned about market volatility this week." Even though there was a lot of up and down action last week, by Friday's close, the DJIA recorded a gain of 1.75% and the TSX a gain of 1.45% for five days of trading. I believe that is still decent progress by anyone's standard.

While equity markets followed the indicators by making upside progress, the negative forecasts for gold and oil were also accurate as gold dipped $20 an ounce and oil prices have also drifted lower. In early July, I wrote that the time to short oil (or have some confidence that it had peaked) would be when the short-term trend chart turned ret. That happened on July 18, 2008 at a price of $129.29 per barrel, at which time you received a special update from me displaying the oil chart with this change. It was therefore interesting to read yesterday's US Equity Market Summary (Canadian markets were closed for a holiday yesterday) where they reported that hedge funds were starting to sell off long positions in oil as the price declined below $120 per barrel, more than two weeks after the indicators you see here turned negative when the price was still almost $130 per barrel. This is another example that shows just how helpful and reliable these indicators are compared to what other major portfolio managers in New York, London, and Toronto use to make decisions. I wonder what tools or lack thereof the investment managers at Aramanth or SemGroup used to manage their billions and steer them into bankruptcy.

So far, it seems like the trends that began a few weeks ago should continue for a while longer. Equities could rally into Labor Day and commodity prices could decline further. Today is a rare instance where the TSX is down over 200 points at the time of writing, while the DJIA is up over 200 points due to lower commodity prices, which helps the US and hurts Canada. I have kept hand written records of daily market statistics since the early 1980's to the present so I have a fairly good memory of market history. US equity markets have always lead major global equity markets, especially at market bottoms. Even as far back as the 1970's, when the US markets enter a downtrend, other world markets have been weaker and when US equities are stronger, the bigger global equity averages are stronger. While there may be differences in the magnitude of the moves, the major trend is almost always the same. Therefore, it is more important for the US markets to rise at this point because they will generally pull the TSX up with it. The TSX has never, in my memory, been able to go in the opposite trend of the SP 500 and DJIA for very long before getting on the US markets bandwagon, either up or down. The long-term oscillator for the TSX is so oversold that it could turn up anytime now. Eventually the TSX should rise strongly to follow the strength in US markets. Just as US financial stocks declined far too much before rising over 40%, energy stocks may be declining too far since they are valued at oil prices of $80 or so per barrel when oil is near $120. Hopefully all North American markets will make further progress in the midst of volatility this week too.

Bonds - The US Federal Reserve is expected to keep interest rates unchanged today. Bonds continue to stay in a narrow trading range.

Commodities - The indicators shown below suggest that gold, gold stocks, and oil could drift lower while oil stocks could turn up soon.

Currencies - The US$ looks stronger than the CAD$ and the euro. The euro may have finally peaked after a long up trend versus the yen.

Catch the trend.

The short-term trend chart for the SP 500 can turn green anytime by moving just a little higher. It turned red in mid-May after the peak and was precisely accurate then.

The short-term trend charts for US and Canadian financial companies turned green almost two weeks ago. US financials usually lead the US markets, which in turn lead global markets. The strength in this sector is very significant. A 40% rise off of a low in a very short time could be of major long-term significance.

The short-term trend chart for the Volatility Index has turned red, confirming the strength in equities.

The TSX has to rise sharply or take a little more time before this turns green but it should follow the SP 500 in due course.

The long-term oscillators for the resource weighted markets of Brazil and the TSX are still the only ones that have turned up yet. However, you can see that they are so low that this indicator for the TSX can turn up at anytime. Perhaps one day this week will mark the low.

None of the long-term trend charts for the major North American market averages have turned green yet. You can see how accurate this indicator has been for enabling investors to determine and profit from the trend of the TSX Financial Index in the last five years. Hopefully, we will see some green in these charts soon.

Indicators for gold are still negative.

The long-term oscillator for gold stocks can still decline more, or pause longer before becoming fully oversold.

The short-term trend chart for oil turned red for the first time since the end of March on July 17, when oil was at $130. There are very few tools that I have ever come across that are as easy to understand and as accurate at these. Saves a lot of time reading and listening to inaccurate opinions as well!

Energy stocks are very oversold and could bottom anytime even though oil prices could fall further.

The euro is a little weaker now that investors have a little more confidence that we may have seen the worst for the US financial companies. This could happen six to 12 months before the economy improves.

The long-term oscillator for the euro versus the yen has peaked. This can suggest a pause or worse, but it is not as accurate as it is at a low when it turns up.

Data supplied by  as of close Monday, Aug. 4.