We don't know and neither do they.

Day Old Stool - February

Dr. Stool' recent lead columns. January, March, April.

Fed Doesn't Cut One, Market Does (2/28/01)
The bulls were hoping that Greensbeans would cut one yesterday. When he didn't, the market got a bad case of gas, which was right in line with the stock proctology prognosis. The rule is simple. When everybody expects something, bet against it.

One of the essences of stock proctology is to follow the analysts. Yes you read that right. But all you stock proctology interns and residents out there know that we recognize that what analysts are saying is the same thing as what comes out the other end. So we watch and listen in order to determine which analyst is the biggest ass today, then we do the opposite of whatever he says. 

Over the past few days one Wayne Angell has distinguished himself as a stock proctology leading indicator with his forecast of an 80% probability of an immediate rate cut. Mr. Angell joins a list of distinguished analysts which Capitalstool has  previously recognized. 

Stock Proctology students know that these folks are paid lots of money to get people to buy stocks. Therefore it is their job to lie as convincingly as possible. The more sincere and authoritative they look, the more dangerous they are. (Consider Mother Superior Joseph).

Enough ranting. For some serious analysis, go re-read yesterday's column. Nothing has changed. The market followed the stock proctology prognosis.

Dr. Stool does get lucky once in awhile. 

To summarize, Dr. Stool is looking for a ten week cycle low over the next ten days at Dowager 10,300, SPX 1200, and Nasty 2050. After that, a good bounce that will do some damage to your short positions before the market swoons again later in the spring. Being the shy guy that he is, Dr. Stool has been covering his shorts the last two days, and expects to cover up completely over the next couple of days.

Good, Good, Good, Good, Gyrations (2/27/01)
Gettin' dizzy? What a wild day! Once again the market was schiz, but in the end, all that dancing led to naught. The Nasdaq's rally ended before it started. Buyers and sellers in the Dowagers duked it out all day, but the bears came out on top.

Upside price objectives of 1280 on the SPX, 10,800 on the Dow, and 2350 on the Naz have not been met, but for all intents and purposes, the eight day cycle up phase is over. They'll try to get 'em up one more time, but there's no gas in the tank. If Greensbeans does cut one, it'll be interesting to see if the bulls can light it up or not. Dr. Stool thinks it'll be a quick flame out. Not enough beans for breakfast.

So the SPX and Dow could still be bouncy, but they'll be bouncing down to retest Friday's lows.

Meanwhile, the downside of 2050-2100 on the Nasty is very much in sight. Dr. Stool noted in the proctoscope that 2050 is just about where the bear market's 

lower channel trendline comes in next week. You can see the channel clearly on the weekly chart. Should be plenty of panic by the time it gets there, so it wouldn't be surprising to see that channel briefly pierced.

Ideally, what Dr. Stool surmises may be  developing here is something that looks like a double bottom in the Dow and SPX, with godknowswhat in the Naz. But the testing of the lows by the other two will be in a good time period for a ten

week cycle low to develop. So the short term cycles will give some juice to the following rally. 

The thing to keep in mind, if this scenario does develop, is that the Bulls will be going nuts proclaiming a bottom. Don't get sucked in to that kind of thinking. Yes it may be a tradable rally, but it won't be THE bottom. But that's puttin' the cart before the horse. Let's see how this selloff winds up first.

A Little Butt Kickin' For Bears (2/26/01)
After stepping up in last Thursday's column, and predicting a short term low, Dr. Stool wavered over the weekend because Friday's action wasn't "strong enough." Ha! That'll show Dr. Stool. Just when he thinks the market is predictable, it proves him wrong...again. There's a lesson there, somewhere.

Looking carefully at the charts through the proctoscope, Dr. Stool thinks he was more right on Thursday night. It's looking more like a  pretty good low, although probably not yet the  end of the ten week cycle.  There's still a period of cyclical vulnerability that lasts until the second week of March.

As a result of the rally, downside projections have adjusted upward to near the prices where the Dow and S&P bottomed on Friday. The Nasdaq objective remains at around 2100 however. Since that index only reached 2156, it could still establish a new low

before the 10 week cycle turns up. The Dow and SPX should merely test their Friday lows.

The rally still looks like it's part of an eight day cycle. The up segment should only last for another one to three days, and the upside is extremely limited. Looks like only 10,700 on the Dow and somewhere around 1280 on the SPX. The Nas hasn't rallied enough to make a firm projection, but 2350 or so is Dr. Stool's best guess. 

Once this rally does peter out, rate cut or no, the market will head back to test the lows set Friday. That test should be successful. This will get the bulls snorting and kicking. They will  again proclaim the bottom, and again they will be wrong. The next couple of months will be choppy and treacherous, but ultimately the major downtrend will prevail, probably in the second quarter. 

If you are still long, (heaven forbid) the market should give you several good opportunities to get out or get short in the weeks ahead. Dr. Stool will be shorting strength, and covering on weakness (Hopefully at lower prices, ahem).

Worse Than It Looks(2/24/01)
Dr. Stool got it wrong in the last column. It's worse than it looks. True, the market did as expected Friday, selling off, then staging a vicious reversal. But it was only an eight day cycle low, and Dr. Stool now thinks that it was not the ten week cycle low.

That cycle is only eight weeks along, which is getting close to a bottoming zone time wise, but is still in a period of severe downside risk. The rally Friday afternoon was not strong enough to change the slope of the daily and hourly moving averages used to project cycle lows. As a result, the price objectives for the 10 week cycle have actually adjusted down. 

The new objectives are 9950 for the Dowager, 1140 for the SPX, and still 2100 for the Nasty, which appeared to have rescued itself from oblivion for the time being. The optimum time for a bottom is March 9, give or take.

Keep your eye out for the Fed to squat and dump. The timing is critical. If they do it early next week, that

would be too soon cyclically, and the knee-jerk up spike would probably be followed by a big dump into the projected lows. If the Fed holds it in for a week or two, until after the market has worked its way down to the price objectives, that would trigger a rally that would be likely to stick for a few weeks.

The next couple of weeks are going to be treacherous, but Dr. Stool will still be shorting the rallies.

Not As Bad As It Looks? (2/22/01)
If you haven't already

After more, grisly, post-close news, the market makers are going to be taking a bunch of stock early, and they'll encourage the selling by dropping their bids. They may let the averages slip below Thursday's lows, the Nasdaq certainly. A real good cleanout will then set the market up for a spike rally next week. The shorts will cover like mad, and the bottom pickers will make their usual proclamations.

They will, of course, be wrong, but it will be a good time to unload some of those crappy stocks you've been gripping and praying over. So if you don't get scared out of your wits today, you should have a good chance to recoup some of the cash that got flushed this week.

The most reliable method for projecting cycle highs and lows has forecast lows of 10,400 on the Dow, 1235 on the S&P, and 2050-2100 on the Nasdaq. The Nasty should see those numbers Friday, and the Dow and S&P have been there. They should retest, or establish nominal new lows, before the turn.

Don't rest too easy however. These are merely short term lows, which will generate only a brief rally. Intermediate lows are not due until late March, and the market will be a lot lower then than it is now. 

Str-e-t-c-h-i-n-g (2/21/01)
Yesterday, Dr. Stool wondered whether the bungee cord would break. But instead of taking it down in the morning, the market makers had some work to do first. They needed to get a little more short. 

The Dowager, in the process of going over the cliff, finally went far enough to begin to enable some downside projections. The Dow is lagging way behind the Nasty and SPX, but is doing her best to catch up. There's nowhere for investors to hide now, and we are headed for a massive, orderly liquidation of stocks, and destruction of nominal value, over the long haul.

The Nasty, meanwhile, looks like it's about to go vertical another 8-10% from here, before giving us one of those patented nasty short covering rallies. The long term picture is getting clearer on this index as well. Sometime in 2002, the index will be a negative number. Sellers will have to pay buyers to take tech stocks off their hands. (ok, maybe not that bad.)

Strangely, the SPX looks like it may temporarily hold at this hugely important baseline of the long term distributional top. Dr. Stool banged his stock proctoscope on the counter a couple times after seeing that. It just doesn't square with the projections in the Dowager and Nasty. 

Well, the bulls will point out that the market is oversold. It's hooey, but in order for

prices to drop much farther the market will need to pause for a few days or weeks. That'll look like a bottom, but it's snot.

How's The Bungee (2/20/01)
Unless this is one of those historic moments when things go from horrible to horrendous, the market's bungee cord will be put to work today. The question is, is it so weakened from a year of overuse, that this is the time it breaks and kills everybody.

Well gang, we gotta play the odds here. Yes, it could be 1929, or 1987 again, and it would be a shame to cover a short position too early if that's the case. On the other hand, with the Fed focused on the charts (Stock Proctology teaches us that the Fed follows the market, not the other way around) the big toad who runs the show over there is likely to give the market a squeeze between the legs with another "surprise" rate cut.

Now, we know that another cut at this point will only spook investors even more. But it'll probably be good for a couple hundred points on the Nasdaq as the shorts rush to protect their profits and the foolhardy go bottom picking. 

As for the charts, Dr. Stool apologizes for belaboring the point, but we're very close to the short term downside measuring objectives on the SPX and the Nasty, and stochastics are near absolute zero on both. The psychology couldn't be more negative, with the smell of fear in the air. 

So we're due for a bounce, after some follow through on Tuesday's plunge that takes us down to our measuring objectives. The question is, how's the bungee? 

Hard Landing in Soft Stuff (2/17/01)

The markets are getting close to landing in something that isn't THE bottom, but it will bounce nevertheless. The bulls have a couple of things going for them after Friday's droppings. And it will be enough get them all excited. They'll be spewing all over the joint.

First, the market is getting "oversold". Dr. Stool hates that word, because in a bear market it's essentially meaningless. But, let's face it, there was one HELL of a lot of selling Friday, and there could be a shitload more early on this week. That will exhaust the panic stricken sellers p.d.q. Those that want out will be out.

Then of course, there is the fact that long term support starts coming in just below current levels. Again, there's no such thing as support in a bear market. But the market will probably pause for awhile around those support trendlines. The bulls will stop crappin' for awhile, and start looking for something to mount again. They will naturally

find it in those flattened tech stocks. 

Last, but not least, the stock chartists in Greenspan's crew are going to be sweatin', shakin', and dribblin', as this thing probes those major support levels. Dr. Stool is willing to bet that the Fed will launch another "surprise" rate cut just as it looks like the market will crumble. 

So if you are short, might

be a good time to take a breather, unless you're committed to withstanding short term pain. It looks to Dr. Stool like the current 6-10 week cycle down leg is within a couple of percent of its max, and that the bounce to follow will present a good opportunity to get short once again. 

Thrill Ride (2/15/01)

Ah yes, just like a day at Universal Studios, lots of excitement, lots of money down the drain, a little indigestion, a little loose stool, but fun for the kids. After it was all over, at 4:15, it was back to reality.

We all know about the hi-jinx in the Dow and Nasdaq. Dr. Stool thinks there were signs of a classic short squeeze. The stocks that went up most have big, huge short interest. 

The shorts are right, but they are creating a huge problem for themselves. Many of these stocks can't go down because of the shortage of stock available. There's nothing to be sold. In a lot of cases, big stocks have short interest ratios in multiple triple digits, that will change as all but the deepest pockets will be unable to withstand this roller coaster. Eventually those enormous short positions will be whittled down.

The market's real story is best seen in the NYSE Composite. The NYA closed up only 0.37%. At 654, it's down 13 points from the high of  667 at the beginning of the month, and just a hair above its low of 651 on Wednesday. Seems there's not much faith in this rally in the broad market. The truth showed up after the bell, and there'll be more truth in the days ahead.

Different Perspective (2/14/01)
After helping Mrs. Stool, ahem, celebrate Valentines Day last night, and skipping his usual nightly comment, Dr. Stool is writing to you from the perspective of having had a night's sleep. At 7 o'clock in the morning, Dr. Stool can't decide whether this is a good thing, or whether he is even grumpier than usual.

The markets are certainly nothing to get excited about. They go up a little, down a little, back up a little. The Naz goes one way, the Dow goes the other. It's pretty boring, like Ring-Around the Rosie. As a stock proctologist, Dr. Stool sees a lot of that -- in the market that is.

All this activity is nothing more than a dog chasing its tail. There are little signs that the Dow and S&P will begin a very minor bounce soon. At the same time, there are signs that the Nasty's bounce is about over. In the end, the charts are telling Dr. Stool that all the rotation will come to naught. We're in a stair-step decline that leads inevitably, inexorably lower. 

Wha'd he say? (2/13/01)
Who cares. Alan Greenspan- he's another guy you should never, ever pay any attention too, unless you plan on doing the opposite of what he's saying. This is a guy, just look at the record. He is always wrong. Remember irrational exuberance? Well he may have been right inprinciple, but cripes, he didn't actually do anything about it for four more years. 

Folks, you' absolutely, positively, must ignore this guy, if you hope to have any success in the market

Based on his meandering, contradictory statements in the Senate hearings, Dr. G. either doesn't know what to make of this mess, or he's trying his damndest to jawbone consumers and investors into a false sense of security. 

It won't work. The second leg of the bear is under way, with a long, long way to go.

And...Action! (2/12/01)
The drama and the tension could not be any greater in a Hollywood script. The Fed Chairman is testifying in front of the Senate. The Dow is making a run at major resistance at 11,100. The bulls have made charge after charge, successfully turning back each assault by the bears.Could all this actually be accumulation? Of course it could. Even Dr. Stool knows that. There's an ocean of liquidity out there, and a lot of it is finding its way into stocks. The Fed could turn the tide for awhile. But it's not Dr. Stool's job to express hedged opinions. He looks at the markets from the underside. You can get all the bullishness you want anywhere. The are a zillion bullish market letters. But there's only one Capitalstool. 

So if there is to be a bullish turn of events, Dr. Stool will only go kicking and screaming, moaning, groaning, bitching, and complaining. You want good cheer, click here. 

Now we've got another little pop under way that could carry the Dow to major resistance, and a short term overextension. The S&P and Nasdaq will tag along.

But in the end it will be for naught. Just another act in a sordid play designed to lull investors into a false sense of security.

Shaving Cream Pie (2/11/01)
Well here it comes. The pundits have formed a consensus that the market is basing. Again, how the freak do they know that? Watching the tube, you can see that they don't. Their eyes dart, they wave their hands, their voices quiver. It's almost as if they're pleading with us to get off our asses and buy some of their crummy stocks.

Let's face it, some of these geniuses are seeing not only their bonuses, but their very careers going down the tubes.

So here comes the dead bull bounce again. The market will stop selling off sometime on Monday, the shorts will nervously begin to take some profits, and the market will begin to run up a little. The pundits will proclaim a successful test of the lows, and that a new bull phase has begun. 

Dr. Stool has only one thing to say: It's another bunch of crap from people you should NEVER trust.

The next time you see one of these clowns on a dais somewhere, give 'em a pie, will ya? Tell 'em it's from Dr. Stool.

Compression Depression (2/8/01)
A talking head on CNN's Moneyhype Thursday night, said that multiple compression has ended. Now just how does he know that? Dr. Stool thinks he made that up on the spot, which is what most of these guys do when they get on TV. Just say 

whatever bullshit pops into your head, so long as it helps you unload your tech overweighted portfolio on the poor unsuspecting slob on the other side of the TV screen, our side. And a lot of people buy that stuff. But those of you who have been studying stock proctology recognize the smell coming from your TV when you hear things like that, don't you?

Dr. Stool has more to say about this in his comments on the Nasdaq. As for the technicals, Thursday's performance was absolutely wretched. The market is at the opening of a long, dark, descent into a stinking abyss. Nobody knows where, when, or how it will end. (It's kind of like a rush hour traffic jam in the Holland Tunnel.) The 

posturing of analysts who continue to express the belief that the market is near a bottom, shows the confidence of the foolhardy, the ignorant, or the snake oil salesman. 

Heavy Artillery (2/7/01)
Whenever the market is on the verge of the big doo-doo, the Wall Street  Conspiracy rolls out the big guns in a massive effort to stop the bleeding before it turns into a hemorrhage. Wednesday night on CNN's Moneyline, it was the Mother Superior of the Pundits' turn, Mother Joseph Cohen.

When they bring Mother Joseph out, you know they must be worried. But her gig doesn't play so well anymore. She's like that other Mother Joe- Battaglia. These schmoes have been saying the same thing for so long, we can all almost recite it by heart. And it's become plain to see that, either they don't know what the hell they are talking about, or they're a bunch of galddamn liars.

This kind of crap encourages a few people to take what's left of their cash and put it back into in the market. And it scares a few gutless shorts into covering their positions with a nickel profit. 

What's left after that? Only the trend, dear friends, Only the trend.

Cisco Crisco (2/6/01)
The Cisco Crisco rally came and went like a flash in the pan. It's all over now, except for the shouting. The sell signals came on the daily oscillators on the Nasty and SPX. The Dowager is hanging over the edge. The cycle charts are signaling a down phase that could last into the first or second week of March. A lot of damage can be done in a month in a market like this. It's too early to make downside projections but, to put it into technical terms, it ain't gonna be pretty.

A major development on Tuesday was the breakdown in the financials from a well formed head and shoulders top pattern on hourly charts. Coming on the heels of numerous signs that the intermediate uptrend was approaching its demise, leads Dr. Stool to believe that the deflation-credit collapse scenario is beginning to reach the consciousness of die-hard bulls. From here on out there'll be nowhere to run, nowhere to hide, BaBee!

Rear Guard Action (2/5/01)
The suspected back up came on Monday. Now what? Intraday hourly stochastics turned positive, early on the Dow, and late in the Day on the Nasty. Those signals portend an uptick in the 8 day cycle. We call it the 8 day cycle, but we all know it could be 6, or 7, or 9. On average, over time, it's eight. 

That's from low to low. The up phase is likely to be short, as longer waves on the daily charts are beginning to turn south. And, there's lots of stock waiting to pound any bump-up. 

We'll call this the Cisco-Crisco rally. Once Cisco pleads its case after the close, the skids will be greased.  

Ursus est Rex (2/3/01)
The bear is king. In one of the most beautifully ugly days seen around here for awhile, the bear established his primacy once again.Looks like we're going to have a little prime rib on the menu for a while, as the bulls are herded peacefully back to the slaughterhouse, after their dung flinging stampede all over the market in January.

Just how smart are all those portfolio managers, their pockets bulging with cash in January. February will tell the tale. Needless to say, Friday gave us some decisive sell signals that portend weeks of weakness ahead. 

But in the very short run, the entrails portend a reasonable probability of a dead bull bounce from around current levels. Don't be surprised by this rear guard action by the bulls, before King Ursus extends his reign throughout the land.

Scary Movie (2/1/01)
What happened in the Blue Chips yesterday afternoon was horrifying for bears. Dr. Stool paused to chew on it, and decided it's not Double Bubble.

The bulls are bound and determined to put every last nickel they have into this market, before it's "too late". This will prove to be their undoing, because absolutely nothing has changed. All this is, is the final blowoff of the insanity we've been witnessing for a month, just a big juicy bear market rally. And it's a helluva lot closer to its top than its bottom. Oh sure you might get a teenie if you got in on those late afternoon buy signals Thursday. Dr. Stool prefers to take a longer term view, say, at least a week. 

By then the daily oscillators, which are oh so close to signaling a peak, will have done so, and you bears can all finally breathe a real sigh of relief, and begin to enjoy yourselves again.

If you are interested in the precarious position of our financial system, check out Credit Bubble Bulletin over at Prudentbear.com.