CANADA AND LATIN AMERICA TOP GLOBAL FUNDS -- EMERGING MARKETS TURN UP -- WEAK DOLLAR FAVORS FOREIGN MARKETS AND GOLD

CANADA IS WINNER FOR THE WEEK ... Most global markets are doing better than the U.S. market. One way to spot the country or regional leaders is to view the weekly (or monthly) international rankings on the Fidelity Fund Carpet, which can be accessed through the Market Carpet on the Stockchart Tools & Charts menu. (Click here). By clicking on the Fidelity International section, you'll see that the leaders for the last week (through Thursday evening) were Canada, Nordic region, Latin America, and Europe. All of those internatioanl funds did better than the U.S. market. Charts 1 and 2 show two ways to participate in the Canadian market, but show essentially the same picture. Chart 1 is the Fidelity Canada Fund; Chart 2 is the AMEX Canada iShares Exchange Traded Fund. Both Canadian funds are challenging their early 2004 highs. Their relative strength lines along the bottom of each chart, which compare the Canadian market to the S&P 500, have already broken out to a new high. That means that Canada is doing much better than the U.S and may be on the verge of an upside breakout. There is a cautionary note on a short-term basis however. Both charts are in a short-term overbought condition as evidenced by their RSI lines moving over 70. That -- and the presence of the early 2004 peak -- leaves some room for consolidation or pullback. The overall uptrend, however, looks promising. Canada has two other things in its favor. One is a strong Canadian dollar. The other is that it is a big producer of natural resources and does well when energy and commodity prices are rising.

Chart 1

Chart 2

LATIN AMERICA HITS NEW HIGH ... Latin America is currently the strongest region in the world. That fact is demonstated in the next two charts which show the Fidelity Latin America Fund (Chart 3) and the Latin American 40 Index iShares exceeding their early 2004 highs. The rising relative strength line shows that Latin America has been outperforming the U.S. since May. Here again, however, an RSI line over 70 shows that the region looks over-extended on a short-term basis. As in the case of Canada, Latin America is also being helped by rising commodity prices since the region is a big exporter of oil and other commodities.

Chart 3

Chart 4

EMERGING MARKETS ARE DOING BETTER ... Emerging markets usually benefit from rising commodity markets as well. And, not surprisingly, they've also been doing better than the U.S. Over the last two months, emerging markes are second only to Latin America. [Emerging markets include Asian as well as Latin American markets]. Chart 5 shows the Fidelity Emerging Markets Fund trading at a six-month high and outperforming the S&P 500 since June. There are some cautionary notes, however, on a short-term basis. First, the daily RSI line is in overbought territory over 70. The second is that the emerging market fund has regained about two-thirds of its April/June plunge, which also makes it a bit over-extended. The good news is that the intermediate uptrend in this group appears to be in an earlier phase than Canada or Latin America. Chart 6 plots the 20- and 50-day moving averages on the iShares MSCI Emerging Markets ETF. Given its overbought condition, a pullback to either of those two moving averages might present a better buying opportunity.

Chart 5

Chart 6

EUROPE IS TESTING HIGHS ... The next two charts round out the top five Fidelity International Funds for the week. The Fidelity Europe Fund (Chart 7) is challening its early 2004 peak. That puts it in a potential resistance zone. But it also puts Europe close to a bullish breakout. The Europe/US ratio line is already in new high ground. Chart 8 shows the Fidelity Nordic Fund breaking through its summer high to turn its intermediate trend higher. Its relative strength line is also rising vs the U.S.

Chart 7

Chart 8

WEAKER DOLLAR FAVORS OVERSEAS INVESTING ... One of the motivating factors to do more overseas investing is the relatively weak position of the U.S. Dollar. American investors get a double benefit from investing overseas in that environment. They profit both from rising equities and stronger foreign currencies. By contrast, any profits foreigners make in the U.S. market are diminished by the weaker dollar. Chart 9 shows the plunge in the U.S. Dollar Index since 2002. The dollar was allowed to fall in order to battle deflationary pressures and to help stimulate U.S. exports and jobs. Unfortunately, the weaker dollar may have also caused the export of U.S. dollars into foreign markets. One of the prime beneficaries of the weaker dollar is gold -- and commodities in general. A falling dollar usually produces higher gold prices along with most other commodities. Charts 9 and 10 show that the bull market in gold stocks began right around the time that the dollar peaked. [The major uptrend in the CRB Index also started in 2002 when the dollar peaked]. Earlier in the week I wrote another bullish story on commodities and gold stocks. (September 21, 2004). Thanks to a drop in the dollar, Fidelity Select Gold was the top performing sector fund for the week. (Chart 10).

Chart 9

Chart 10