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500 Archive-June New Lows in August (6/29/01) Dr. Stool thinks he finally has an idea of where the various short term cycle lows were. For the past few weeks, until today, he felt like the famous Facawi tribe, wandering in the desert, repeating to no one in particular, "We're the Facawi." Yes, well... The lows were 11 days ago. That means the 4 week cycle may have topped out Friday, based on hourly oscillators. It also means that the direction of all these cycles is essentially horizontal, the infamous sideways up phase, that occurs when the next longer cycle is headed down. Monday is a key day. Hourly indicators suggest that the shortest wave we bother with, nominally 13 days, but apparently a little shorter lately, did peak Friday. If Monday confirms by showing weakness, then we'll probably see a 1200 level probe before the week is out. Because the 6 and 10-11 week cycles are young, that test should hold, leading to another little spike in week two. After that things should steadily deteriorate, leading to a steady grind to the south through August, that should take the SPX to new lows. Cycle Conditions
Last Chance For Romance (6/28/01) The amplitude of the 13 day cycle having diminished to nothing, the good old 8 day cycle now rears its ugly head, and give us a boil pooping squeeze Thursday. Ugly as it was, it was singularly unimpressive. Second thoughts will show up shortly, if not today, then next week. Now it looks like the 4, 6-7 and 10-11 week cycle low may have been ten days ago. Ten days into an up phase, and this is the best you can do? Dr. Stool scoffs at you portfolio sphincters! Time and again you have run the shorts, expunging any possibility that they will be there to save your asses when this thing finally starts to fall apart. What, pray tell, do you have to show for your three rate cut revaluation frenzies since April. Nothing. Each attempt to run the shorts is more pathetic than the last. Your portfolios are worth no more, you have no more cash, and yes you've put a lot of shorts out of business. They won't be there to buy on the next drop. No sir they won't. How are you going to keep this market from falling apart? Smoke and mirrors. The time has come to say goodbye to your precious stocks. This will be your last spin on the dance floor. Soon, you'll have to say goodbye to them forever. You have, at most another couple of weeks to say goodbye. Cycle Conditions
Going Flat (6/27/01) We are witnessing the death of volatility. The Fed cut interest rates and the market barely budged. This is what happens when no one gives a damn, as is typical of the mid stages of a bear market. The 13 day cycle now appears to be in a down phase. However, the projected lows for other short term cycles are only 1-2% below current levels, and the 13 day cycle low is due next week. So this decline will be shallow and short lived. The rally to follow should also be weak, and short, as the 4-5 month cycle starts to head down in earnest in the second half of July. Cycle Conditions
Bass-O-Matic Market (6/26/01) The SPX stayed locked in its tight trading range Tuesday. The recovery from the bad news in the AM indicates the market is still in the top phase in the 13 day cycle. However, it's possible that the 4 week cycle is making a bottom, and that lows for the 6-7 week and 10-11 week cycles may also be near. Narrow trading ranges make for cloudy cycle pictures. Traders can get chopped up on both sides. There are some signs here that multiple short term lows may be near. Cycle low projections are less than 2% below current levels. A short lived rally starting sometime in the next few days could shred your shorts again. Dr. Stool is gonna sit this out until the picture in the proctoscope clears up. Cycle Conditions
Not the Big Dump Yet (6/25/01) The downturn in the SPX indicated a 13 day cycle down phase. That was day 6, so the downward drift should last through the week, the Fed cutting one, notwithstanding. In the short run, the downside doesn't look to be dramatic. From where Dr. Stool sits it looks more like a sideways drift with a downward tilt. There may be a four week low coming up near the end of the month and a six week low right after. So the risk is that the sphincters will keep trying to run the shorts for a few more weeks. Mid July is the beginning of the period of greatest downside alignment. Bears' patience may be tested. The Fed will cut, and the market will sell off a bit, but Dr. Stool doesn't think it will be the big dump we're waiting for. Cycle Conditions
Murky Safe Harbor (6/22/01) And on the sixth day (of the 13 day cycle up phase), the market rested. Well, it didn't exactly rest, more like it got nauseous, saw stars, and fainted. Could it be a drug overdose? Let's see. You're a portfolio sphincter, and you are loaded to the gills with Murk, one of the brownest of the brown chips, one of the greatest scientific-industrial machines in the history of the world, a money making pile driver, a safe port in the storm, and it drops 10% in one day. Right out the bottom of a three month trading range. How would you feel? The SPX (Sphincters' Index) is made up of lots of stocks like this, and there will be more air pockets to look forward to. The vested interests will fight to keep this thing around 1200, but it will be a losing battle. The 13 day cycle is topping out, if it didn't do it already Friday, and the 4, 6-7 and 10-11 week cycles are apparently dead in the water. With the 4-5 month cycle starting to fall apart, things are likely to get very ugly after the Financial Bubble Inc. meeting Wednesday, regardless of how big a fart it cuts. Cycle Conditions
So let's stick with the expectation that the market will move sideways as it completes the positive phases of a couple of short term cycles. Once they are finished, whether it's tomorrow, or three weeks from now, the market will go into an accelerating decline through late summer. The portfolio sphincters are using these rallies to squeeze the shorts, in a concerted effort to provide a market for them to unload as much of the overpriced crap from their portfolios as they can. This process is a necessary evil, as it whittles down the mammoth short positions that were largely responsible for driving the market up and have been preventing it from dropping. As the shorts are forced out, the market will fall, and down will come baby, bathwater and all. Cycle Conditions
The Last Running of the Shorts (6/20/01) Cycle low projections have congealed at 1205, a level which the SPX reached last week. Hourly oscillators for the 13 day cycle have actually been uptrending since June 14, but the trend is pathetic. That is consistent with the forecast of a weak up phase which goes essentially sideways for a few weeks. The 13 day cycle is actually 4 days old. If the market were healthy, the Sphincter Index would have been flying by now. But the market isn't healthy. It's sick. Dr. Stool thinks the only thing keeping it from falling apart now is short covering. The portfolio sphincters got all loaded up in April and May on their 401K money. They've shot their wad, and shouldn't be able to power this market higher. Intraday action suggests to Dr. Stool they are actually selling on balance at this point. The 1225 area is important resistance. If the Sphincs gets through that, they'll run the shorts to 1250-1260, where a tidal wave of selling would await. If they can't run 'em, they'll probably flop around in the 1200-1225 area for a few more weeks. That would be consistent with the alternative cycle interpretation Dr. Stool discussed in the Dow and Nasdaq comments. Cycle Conditions
Upstream Rapids (6/19/01) Multiple short term cycle low projections are just below Tuesday's closing levels, and the time frame is right for a bottom in the 13 day, 4 week, and 6-7 week cycles. Lest anyone get the wrong idea, Dr. Stool wants to emphasize that the cyclical up phase is in the context of a declining 4-5 month cycle phase, in a bear market and long term secular downtrend. The up phase should manifest as a two or three week trading range, probably confined to the 1175-1225 area, based on current channel projections. Look for a waterfall decline beginning in mid-July. Cycle Conditions
Bump in the road? (6/18/01) The SPX may be easing into a 13 day cycle low, but centered moving averages for longer short term cycles point to another downdraft. This is day 13 of the 13 day cycle, hourly oscillators are in a bottoming range, and the index is close enough to its price objective for a reaction or consolidation to develop from here. From a time standpoint, a 4 week, 6-7 week cycle, and possibly a 10-11 week low also appear to be due this week. The objectives for those cycles are significantly lower than the 13 day wave, however. In terms of the big picture, in particular the 4-5 month cycle, the rally phase that's due should be little more than a bump in the road. The down phase should last for at least another two months. It's too early to project a low for that cycle by cyclic techniques. Assuming a brief rally from the 1200 level, followed by a breakdown, the down move to follow will test the low at 1081. Cycle Conditions
Don't Look a Gift Horse in The Butt (6/15/01) The SPX bounced off the 1200 level, which, as one Stock Proctologist in Training (SPIT) suggested, is just a little too obvious. There's no real sign of any diminution in downside mo and centered moving average projections remain aimed at the 1165-1185 area for the next short term low. That low is due in the early part of next week. Here goes the broken record again, but that huge short interest position is not going to allow the market to go straight down. Look, you have a short position or positions, and so do all your buds. Most of your buds are new to this business of shorting, so now that they see a little profit, or find themselves getting even, what are they going to do? Right, they're going to cover, and there are huge numbers of them. So when the portfolio sphincters stop selling for a bit, the market makers start a little buy thing, your newbie short buds jump to cover, and the market goes up vertical for a few days. This is the nature of bear market rallies. The big picture is down, and while Dr. Stool hates to call attention to the obvious, preferring to talk about those subtleties others might not notice, the SPX just broke down from a head and shoulders top. Those kinds of things tend to beget a wave of selling by charthead know-nothings followed by an immediate return to the neckline. Dr. Stool is considering taking his money out of the mattress and doing some shorting on the next rally, but he isn't going to jump the rally or chase the market down. He'll be patient, wait for the bounce to unfold and poop out, then pounce. Those of you who went short at 1315.9 can afford to wait out the bounce, but if you see the index get down to 1185 or below and the selling dries up, don't look a gift horse in the butt. Cycle Conditions
When Ugly is Beautiful (6/15/01) The selloff confirmed completion of the 4-5 month cycle top. Severe weakness is de rigueur near short term cycle lows, and the timing is right for a 13 day and possibly 4 week and 10-11 week cycle lows early next week. Centered moving average price projections moved down slightly, to the 1170-95 area. The SPX exceeded its 4 week cycle low projection. That cycle will probably be a non-issue as amplitude is suppressed. The next short term up phase will be within the context of a 4-5 month cycle down phase which probably has about two to three months to run, but may be as short as a month. It's too early for a downside projection. But with several cycles lining up in down phases later in July, it's going to be ugly, which to a bear of course, is beautiful. Cycle Conditions
Today in Pamplona (6/13/01) Tuesday's reversal day was followed by Wednesday's. Wednesday's was more convincing, as we should expect at this stage of the topping out process of the 4-5 month cycle. The market is well past the midpoint of the top, and is beginning to take on a more negative tone. This trend should gradually accelerate in the weeks ahead. The SPX, or sphincter index, so-called because it is the portfolio sphincter's benchmark, is about to slice through it's 53 day average, which is the representation where the direction of the 4-5 month cycle was 26.5 days ago. A decisive drop through that line would confirm that the direction of the 4-5 month cycle had reversed. But there are short term price objectives just below, in the 1205 to 1235 area, and a 13 day cycle low is due over the next couple of days. A 10-11 and 4 week cycle low are also due in the next week or two. Considering that and the fact that the sphincters are going to try to hold things together at the perceived support level around 1205, you're likely to see yet another attempt at running the shorts next week. That would be in the context of a 4-5 month cycle completing its top, before the big down in July and August. But this week is for running the bulls. Cycle Conditions
Stool Will Happen (6/12/01) Ok, so we had a little short squeeze again. They're just popping out all over. In spite of all that covering at the slightest sign of godknowswhat, the market has gone nowhere for almost two solid months. What has all that short covering and all that Fed farting done for the market? Nothing. Absolutely nothing. These little pops are actually good for the bears, because they should result in the unwinding of those short positions. But if not, there will be a catalyst, probably in July, to send this market careening lower. Something will happen that will get those portfolio sphincters to open wide, and all that overvalued crap will come spewing out. What will the catalyst be? Your guess is as good as Dr. Stool's, but Dr. Stool is picking a major tech bankruptcy as a dark horse candidate. For now, we've got a 4-5 month cycle that's rolling over ever so slowly because of that short covering support. Whatever the cause, the cycles will not be completely in gear to the downside until sometime in July. Psychology will then be extremely vulnerable to negative events. Given the underlying trend, those events are certain. Cycle Conditions
Dull and Duller (6/11/01) The S&P lost less than a percent Monday. This is consistent with a rolling top process in the 4-5 month cycle. It's going to be messy for a few more weeks. Sorry for repeating this so often, but they just aren't ready to go straight down, especially in light volume. The enormous short positions in key stocks need to be whittled down. That process could be underway but we won't know for sure for weeks because the NYSE only releases weekly short selling data with a two week lag. If the data doesn't tell us, the price action will. It's enough to know that short positions are historically enormous, way beyond anything ever seen before. So when volume dries up, it's tough for prices to drop. because shorts are constantly covering. If short covering exceeds new shortselling, the market will eventually accelerate to the downside, as this prop is removed from the demand side. The fact that the market did close lower on such light volume Monday means that there's even less demand from the long side, the portfolio sphincters, and other wahoos. They are even likely to be net sellers at this point, although only in dribs and drabs. The sphincters' favorite index should work it's way lower into a short term cycle low due sometime late this week or early next, in the 1235 area. Then another short covering bounce, followed by another rollover. It's incredibly dull, but it's consistent with current mixed cyclicality. Cycle Conditions
End of Mood Swings (6/8/01) Friday should mark closure for the muddled mess which has given Dr. Stool such problems over the last week. The 13 day cycle has topped out. The 4 week cycle is headed down, and the 4-5 month cycle is rolling over. Those things, which looked so uncertain a day ago, now look to be for real. When longer term cycles are topping out they tend to do so by first flattening, then turning down. In that flat stage, when the upward impulse has petered out, and the downward push has yet to take place, the shortest cycles can have a big increase in amplitude, whipping investors back and forth on the slightest whim. The pattern is evident not only in the price patterns, but, alas, in Dr. Stool's mood swings over the last few days. This too shall pass. Based on Friday's action the daily chart oscillators which had been neutral and inconclusive are beginning to resolve negatively. Investor psychology is starting to turn negative after 2 1/2 months of unadulterated insanity. There will be enough selling ahead to absorb the short covering, and push prices lower. Cycle Conditions ( A real mess)
Short Squeeze? (6/7/01) Looking at this chart throughthe stock proctoscope, Dr. Stool can only exclaim, "It's a mess in there. Stand Back." The market's action is taking turns each day. One day things look like they'll play out as expected, and the market will head south. The next day it looks like it's getting ready to blow it's stack. Of the three major indexes, this chart looks the most like the 4-5 month cycle top is under way. But first, based on centered moving averages for the 13 day cycle, there's an upside projection of 1290. The worst thing about this chart picture from the bears view of things is that a ten week cycle low is due. If there's any amplitude left in that cycle, the market could have an up crash. The potential is there for a huge, low volume short squeeze, where the market just goes vertical, in spite of only minimal buying by portfolio shrinkers. For more on this check out today's comments on the Nasty. Cycle Conditions ( A real mess)
Head for Acapulco (6/6/01) The portfolio shrinkers favorite market index, also known colloquially and aptly as the Sphincter, contracted quite a bit on Wednesday. It's beginning to look like that Finger formation last week was the top. The comments here mirror what Dr. Stool said for the Nasty. As the 4-5 month cycle rolls over at the top, the shortest cycles increase in amplitude, and the 10-11 week cycle flattens. So expect to see lots of bouncing around over the next few weeks. As for the 10-11 week cycle up phase that's due, fuggeddaboudit. The 4 week and 6-7 week cycles are headed down, and their cycle projections are beginning to congeal around 1205-1225. The 4-5 month cycle is starting to tilt down as well. The 13 day wave looks like it topped out early, which is a real good sign for bears. Look for a pretty good downdraft over the next ten days. All in all, the bouncing should look like a slinky going down stairs through June. Cyclicality will be most negative in July. That's when you can head for Acapulco for the best view of the cliff divers. Cycle Conditions
Too Hot For Bears? (6/5/01) It's not as ugly as the Nas (for us bears), but it's ugly nevertheless. Like the Nas, the SPX looks like its been in a sideways down phase since the beginning of May. It has subsequently been moving across the 4-5 month cycle wave band in an easterly direction, rather than southerly, as we would have expected under Dr. Stool's more bearish scenario. On the other hand, the 6-7 week cycle bottomed in mid May, and has gone nowhere, so that cycle is in a sideways up phase and should be topping out imminently. There's still hope for the bear case, as long as cycles are jousting with one another. This rally would have to run out of gas within 2.5 days in order to confirm that the bearish scenario Dr. Stool holds so dear is not completely daid. If it goes beyond that, along with breaking out above 1320, things are going to be a lot hotter than bears like this month, as the bubble refills itself courtesy of Algae's FBI.* Cycle Conditions
*Financial Bubble Inc. Algae aka Al G. is FBI Director. He got his name by spewing green while inflatulating the financial system.
Sawtooth (6/4/01) The SPX still looks to be in a top building process, with no surprises likely. (Dr. Stool is a little more worried about the Dow.) The 4 and 6-7 week cycles are conflicting with the 10-11 week cycle. The 13 day cycle should be headed up for a few more days. The 4-5 month cycle is gradually rolling over. The market is listless, but should have a slight upward bias for three more days. Then it'll be listless on the downside for a week or so, which should drop the index into the 1225-1235 range, before another weak rally. Look for a saw-toothed pattern well into July. That's when things should begin to deteriorate. Flat Out (6/1/01) The SPX staged a bit of a bounce off the 13 day cycle low. The 10 week cycle may be in a bottom here as well. But with the 4-5 month cycle topping out, and the 4 and 6-7 week cycles headed down, not much is likely to happen in either direction. Daily oscillators remain on sell signals, but cyclicality is mixed for the next few weeks. As with the Dow and Nasty, don't expect much to happen until July when the 4-5 month cycle should be heading down, and the 10-11 week cycle is also in gear. Cycle Conditions
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