Volume I, Issue 53 | email: info@outperform.biz

IMPORTANT NOTICE: Bulls Zen Bears market analysis won't stay a free service for long! Sometime in the New Year, this weekly service will become a paid service. If you'd like information on how to stay or get on the email list of this newsletter, please reply to or email communications@tradingpostfinancial.com.

EXAMPLE OF WHAT TO EXPECT FROM THE MEDIA AT A BEAR MARKET LOW DURING A RECESSION, WHEN THE RECOVERY STARTS, AND AT A RECOVERY HIGH. LONG TERM BUY SIGNAL FOR GOLD AND GOLD STOCKS.

Many investors wonder how the markets can improve when the economic news is so dreadful. The best way to address that concern is to look back at the last time stocks were this undervalued and the economy was in a severe recession -- 1982. You can see articles from my library by Time magazine below. The first article was printed in the midst of the recession during the week of the stock market low on Aug. 16, 1982. The second article was printed when there were signs of an economic recovery on Feb. 28, 1983. The last article was written near the market peak, after the SP 500 Index was up 100% in one year after the bottom on Aug. 22, 1983. The arrows in the chart of the SP 500 Index below shows where the SP 500 Index was valued as articles were published.

These are some of the comments published right at the market low in August 1982:

• "I think we will see a repeat of the crash of 1929."
• "I believe we are in the early days of a depression."
• "The climate for business continues to deteriorate."
• "Nearly 500 enterprises now shut their doors every week, the heaviest corporate failure toll since the early '30's."

I think comments like that sound rather familiar, don't they? If stock markets could not only rise, but rise 100% in one year when the economy was so bad in 1982, why can't they rise now? Moreover, in 1982, government guaranteed investments were a very attractive alternative at 15% or more, now the alternative is closer to 3% when stock dividends can be double that. It was not prudent to allow all the optimism about higher oil prices to sway one's thinking last summer. I do not believe it will be prudent now to let all the doom and gloom influence an investor that we are in a new era of economic doom.

The lesson we can learn from this exercise is that investors are not likely to get useful investment information by listening to the news. Yet many investors seem to believe that the more information and opinions they listen to, the wiser they will be. As an investment professional for almost thirty years, I can verify that consuming volumes of information was not helpful. After examining every option I could find, I have come to the conclusion that the indicators shown in these updates are the best tools for making prudent investment decisions. The reason that they are so much more helpful is because they show us where and how the money is actually moving, not where experts believe it should be moving. Remember, market look forward; the news and most analysts seem to look back, expecting current trends to continue. The long-term oscillators and the trend charts shown here show us when the trend is changing. An excellent recent example of this is the buy signals given by the oscillators for Canadian 10-Year Government Bonds in the Oct. 21, 2008 update and the buy signal given for US 30-Year Bonds on Oct. 27. While government bonds were stable during September and October, after the buy signals the Canadian Bonds are now up 8.8% and the US Bonds are up 19.9% in two months. Both bonds are now at all-time record highs. I believe these indicators will continue to be very helpful for determining the trend of stocks, bonds, commodities, and currencies in 2009. Happy New Year!

Bonds - Bonds are very overvalued and there is excessive optimism. Indicators are neutral.

Commodities - Long-term trend indicator issues a buy signal for gold and gold stocks. No indication of an up trend for oil or oil stocks yet.

Currencies - No change since last week, other than the long-term trend indicator could soon turn positive for euro vs. US$.

The long-term oscillator for US equity markets (and most global markets) are still rising, suggesting the trend is still up. The oscillator for the TSX is still mixed.

The long-term trend indicator for gold stocks is positive (green) for the first time since spring. The long-term oscillator and short-term trend indicator for gold and gold stocks turned up in November. All indicators are now positive for gold and GOLD.

This illustrates the huge rally for US bond prices to all-time highs right after I issued a buy signal at the low on Oct. 27, producing a gain of 19.1% in two months.

When this indicator for oil turns green for the first time since July at $129, it will issue a buy signal -- the same for oil stocks. No need to spend hours studying what is happening with oil. Just watch this. How many experts got oil right at $130?

The euro has moved up sharply and could soon turn green for the long term for the first time since summer. This has been one of the best indicator for currency movements. Alan Greenspan has said that it is impossible to predict currency movements. I would disagree. What do you think?

Volume I, Issue 52 | email: info@outperform.biz

IMPORTANT NOTICE: Bulls Zen Bears market analysis won't stay a free service for long! Sometime in the New Year, this weekly service will become a paid service. If you'd like information on how to stay or get on the email list of this newsletter, please reply to or email communications@tradingpostfinancial.com.

US FED LOWERS RATES TO ZERO AND ADOPTS A POLICY OF QUANTITATIVE EASING. EXPERTS WONDER IF IT WILL WORK. EXAMINE THE EVIDENCE BELOW TO FIND THE ANSWER -- DON'T FIGHT THE FED. BUY SIGNAL FOR THE CANADIAN DOLLAR AND EURO.

The US Federal Reserve has pulled out all the stops to try to pull the economy out of a recessionary spiral by targeting a Fed Fund Rate as low as 0%. The Fed is also taking the additional step of purchasing all sorts of investments to lower mortgage rates and provide a bid for some distressed debt. As is always the case during uncertain times, the big question is, will it work?

People wondered the same thing during the late 1970's as many global economies were in an inflationary spiral. Wage and price controls enacted by Nixon in the mid 1970's had not worked. Neither did a brief spike in interest rates from 10% to 15% in early 1980. Therefore, in 1981, Fed Chairman Paul Volker took the bull by the horns and pushed interest rates close to 20% and held them there. That action was successful in breaking the back of the inflation. However, by mid 1982, the high interest rates had caused massive losses, 500 corporate US bankruptcies a week, 12% unemployment rates, a severe recession and a bear market for stocks. By August 1982, the Fed had been lowering interest rates for months with few visible signs of improvement other than the bond market. Again, people wondered, how on earth will the economy ever recover from this shock. Four months later, in November 1982, US equity markets were at record highs and there were numerous signs of a powerful economic recovery. (Volker is now one of Obama's advisors.)

In 1987, the Fed raised interest rates aggressively until the stock market crash in October. People (not just investors) were wondering if this crash would cause a depression just like the 1929 crash did. The Fed lowered interest rates sharply the day after the crash. Would it work? The bond market soared, and by late 1987, equity markets and the economy were improving. The September 2001 terrorist attacks and the longest bear market since the 1930's (in October 2002) had many doubting whether anything would ever be able to turn the economy and stock markets around. Of course it did.

Evidence exhibit #1 - The relationship of the euro to the Japanese yen is a barometer of the carry trade. It is perhaps the best indication of the unwinding of leverage by hedge funds and the willingness of global money managers to assume risk. You can see that the euro has formed the normal seven week base-building period from late October to early December and has now moved to a higher high. The indicator has now turned green (positive) for the first time since the end of July. This is a clear positive signal.

In the early 1930's, interest rates and taxes were increased. The US government waited for years before investing capital in 6,000 banks. These are some of the reasons why a depression developed then. Since every economic challenge is different, there is often doubt whether the action of the Fed can slow down a roaring economy or revive an ailing one. However, history shows that appropriate action by US Federal Reserve officials has always been successful in the past. That's how the saying "Don't find the Fed" came about. The gloom and uncertainty by the consensus of experts (which is so common at market lows) do not alter the facts of history. There is no reason why steps taken this fall will be successful either. Please examine the indicators shown here to observe the impact that the actions have had so far.

Bonds - Government bond prices have skyrocketed to record highs since the long-term oscillators gave a buy signal for bonds as reported in late October. In 1982 and 1987, bond prices lead stock prices higher as they usually do. Bonds are a hold. The Fed is buying them and creating a bond bubble. Don't stand in the way.

Commodities - Indicators for gold and gold stocks have been positive for a long time. Indicators for oil, other commodities, and their respective securities are still in the process of bottoming.

Currencies - The long-term oscillators and the short-term trend indicators have turned positive for the euro vs. yen, euro vs. US$, and the CAD$ vs. the US$ resulting in buy signals.

Exhibit #2 - The difference in yield between corporate bonds and government bonds moved to highs of 4.3% on Oct. 10. The rate declined below 1.5% in the last two weeks, which is in the middle of the trading range since August 2007. This is positive.

Exhibit #3 - The Volatility Index (VIX) measures investor fear by comparing the volume of trading on shares that are rising with the volume of trading on shares that are declining. After making a double top at 80, the Index has now dipped to 42.81, the lowest level since early October. The long-term oscillator for the VIX turned positive for equities in late November and the short-term indicator has been red (positive for equities) ever since.

Exhibit #4 - The short-term trend indicator has turned positive for the SP 500 for the first-time since August after the long-term oscillator turned positive in late November. While it is positive for the SP 500 and some other market averages, it is not yet green (positive) for every market average. When that happens, it will be a confirming buy signal for equities.

Exhibit #5 - All indicators turned positive for Canadian and US government bonds after a buy signal was issued in these updates during late October. Bond prices usually lead stock prices higher since lower yields (now close to only 2% for 10 years in the US!) make stocks more attractive and competitive.

The long-term oscillators for North American and most global equity markets are moving higher, suggesting that the trend is up. It is still very low and has a long way to go before reaching the overbought level above 0.8 on the left hand scale.

The long-term oscillator for the Canadian TSX is also moving higher but lower oil prices are holding it back a little. US equity markets just about always lead all other global markets. As long as US equities are moving higher, most every other market will follow along.

The indicators for gold and gold stocks were the first commodity and resource sector to turn positive. Gold is now positive enough that it can turn this long-term trend chart green (positive). The US$ may have peaked, which is positive for gold.

Oil prices have declined like an elevator shaft since a sell signal was issued at $129 on July 17. None of the indicators have turned positive yet even though oil is down to $40 per barrel. As you can see, this has been a very accurate indicator in a very volatile commodity.

The long-term oscillator has turned up for the CAD$ vs US$ and the short-term trend indicator has turned positive issuing a buy signal. A bottom in oil prices would be helpful for the CAD$.

The long-term oscillator has turned positive for the euro vs. yen. This, together with exhibit #1 turning positive on issues a buy signal.

The euro has been strong as the US dollar has declined from its overvalued state. This move has been so powerful that this long-term trend chart can turn green soon. You can see how accurate this indicator has been in the past. If a currency trader spent only a few minutes a week and looked at nothing other than this to go long or short, the results would have been fabulous.

Volume I, Issue 51 | email: info@outperform.biz

IMPORTANT NOTICE: Bulls Zen Bears market analysis won't stay a free service for long! Sometime in the New Year, this weekly service will become a paid service. If you'd like information on how to stay or get on the email list of this newsletter, please reply to or email communications@tradingpostfinancial.com.

EVIDENCE THAT MARKETS BOTTOMED ON NOV. 20 CONTNUES TO BUILD. STOCKS REACHED CLOSE-TO-RECORD HIGHS WITHIN 14 MONTSH THE LAST TWO TIMES THEY WERE THIS UNDERVALUED. GOVERNMENT BONDS ARE EXTREMELY OVERVALUED.

The Nov. 20 low coincided with a turn to the upside in the long-term oscillator for the significant US financial sector on Nov. 24 (see chart below). Since that time, North American equity markets have risen more than 10% from the lows in spite of very negative news. The news looks back. The markets look forward. When the long-term oscillators turn up from the lows, it indicates that the worst-case scenario has been factored into prices and the selling has been exhausted. The long-term oscillators for the US financials and US market averages have been rising from the lows for three weeks now, suggesting that equities are in the early stages of an advance. Remember, markets "climb a wall of worry."

The normal progression out of a bear market is:

• declining interest rates,
• rising bond prices,
• rising equity prices,
• rising commodity prices,
• increasing consumer confidence, and
• an improvement in the economy.

Global interest rates have been declining sharply. Government bond prices have soared to record highs and stocks have moved higher. Weakness in the US dollar has had the result of increasing the value of other currencies and some commodities. It is all taking shape. Do not put too much faith in the news. Remember how wrong the forecasts for oil prices to reach $200 last summer were? Now analysts have reduced their forecasts to $20 or $30 per barrel. Time and experience have shown me that the tools shown here, which show us what the money is actually doing, is much more accurate than listening to experts that say what the money is going to do.

The long-term oscillator bottomed at the very oversold level and has continued to edge higher since Nov. 24. Other moves to the upside from these levels have produced major rallies since 2004. The problem with the financials leads the markets lower. They are leading and should continue to lead all global markets higher now.

Stocks are so undervalued that there are now over 2,200 major companies around the world where the total value of their stock is less than the cash they have in the bank! This is eight times as many as there was at the 2003 bottom. Usually equity markets become very strong when there is enough cash on the sidelines to purchase 20% of the total value of the US SP 500. There is $3.7 trillion or almost 50% of the value of the SP 500 sitting in cash now. Why? It is because of fear. There is so much demand for US government treasury bills that the interest rate is below 0%. Investors only care about the return of their money, not the return on their funds. That means that the US government is being paid to borrow money! This is not a normal situation. Almost like the law of gravity, market forces will return things to normal. Extreme and unsustainable optimism for government bonds cannot last forever either. On the other side, high yield corporate bonds are pricing in a default rate of over 45% when the actual default rate now and in the 1930's was 4%. Much more than enough risk has been priced into most assets, even if the slowdown is severe.

The historical distortion in prices for many assets could snap back in a violent manner when confidence starts to return. The Chinese stock market ignored all the recent bad news and has already risen 50% from the lows since Oct. 27. That could happen in North America too. There have only been two times in recent history when US stocks have been this cheap -- during the sever recessions of 1974 and 1982. In 1974, US equity markets rose from the bottom to within the range of record highs in 14 months. In 1982, it only took  three months. Like now, there was very little hope during the dark days of those difficult periods either.

Bonds - The indicators are still positive but we have to watch for signs of a peak.

Commodities - Gold and gold stocks continue to act well while other commodities seem to be bottoming.

Currencies - Weakness in the US$ and the yen is positive. Indicators for the euro and CAD$ look promising.

The long-term oscillator for the US SP 500 Index has followed the financials oscillator higher since Nov. 20. This is the first stage of three stages to turn positive. Some, but not all oscillators for other US and global market averages have turned up too. The Canadian TSX index, for example, is in the process of following along.

The second stage to confirm an uptrend is when this short-term trend indicator turns green or positive along for every market index. It appears to be in the process of turning positive for the SP 500 for the first time since August, but it is not positive for every market average at this point.

The final stage is when the long-term trend charts turn green for every market index. You can see that the SP 500 will have to rise above 1,000 for that to happen now. If an investor lived on an isolated island and only had this indicator to go by, he/she would capture most of the gains and eliminate much of the losses and stress associated with a long-term market cycle.

The Canadian TSX Index oscillator is in the process of moving higher but may be held back a little by the heavier resource weightings.

US and Canadian resource sector oscillators look like this one of the TSX Energy Index. The green line above is the actual level of the Energy Index. You can see the strong base that has been built since October.

The long-term oscillators for gold stocks turned up weeks ago and the short-term trend charts have been nice and green in time for Christmas!

The red and green line (bond price) shows bond prices rising to record highs while yields decline to record lows. A US 10-year bond yields only 2.55% compared to high yield bond yields of 19%, and stock dividend yields of 6% to 7% for top quality stocks. The long-term oscillator is in the over-bought range, which is not always a negative. It will be negative when the short-term trend chart turns red.

The short-term trend chart for gold is green (just like the chart for gold stocks) and the long-term trend chart could turn green for the first time since summer if prices can stay above $800. The long-term oscillator is rising for gold indicating that the trend is still up.

The long-term oscillator and the short-term trend chart still have to turn positive for oil before this long term trend chart can turn green. The July 18 special update stated that the oil was peaking at $129. This indicator has been very accurate for the longer-term trends.

Strength in the euro and weakness in the yen has finally turned the short-term trend chart for the euro vs. yen green (positive) for the first time since early August. This occurred after an eight week base-building phase. It is a good indication that much of the de-leveraging has taken place and that the willingness by global money managers to assume risk is finally increasing for the first time since this crisis began.