We don't know and neither do they.

Day Old Stool - March

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

Keep An Eye on the T-Bond (3/29/01)
As the stock market sloshes around in this downward tilted trading range, Dr. Stool urges you to watch the T-Bond yield chart. Dr. Stool doesn't usually talk about long term interest rates on the front page, but he smells some doo doo, and wants to bring it to your attention; which is, of course, the job of the stock proctologist.

Think about it. When was the last time you heard an anal-ist anywhere say anything bearish about bonds. Last August maybe. If you want to talk about universal bullishness, the bond is it. Even Dr. Stool was bullish on bonds. 

Well guess what. Bond yields are in at least a short term up phase. Dr. Stool has been worried about an intermediate bottom in bond yields for a month or so now, and it's beginning to look like we've seen it. The sells signals are very clear. 

This upmove in yield is not a flash in the pan. It certainly looks like it will stick. 

Is it a major trend reversal? It could be. The overwhelming bullish sentiment is a definite warning. Long term downside objectives on monthly charts were to 4.90-5.30. The 9 month cycle projected to 5.30. The yield got to 5.21 last week. 

Think about the implications of a sustained uptick in yields for a minute. One of the only things holding up this economy is housing and mortgage refinancing. If mortgage rates uptick here, that party's over. And rising yields have lots of other implications about inflation, budget surpluses, etc., none of which Dr. Stool knows anything about. But in Dr. Stool's way of looking at things, the charts tell us everything we need to know, way before it's clear what is going on, or why.

Anyway, Dr. Stool was so worried about this development he sold 1/3 of the bond position in his major client's account and went to cash. 

Is that ok, Dad?

An Open Letter From Dr. Stool (3/28/01)
Dr. Stool would like to thank all you Stooligans out there for your support, especially the fine people over at Bearforum. 

Something has happened which pains Dr. Stool deeply. It seems that Dr. Stool has been  criticized for being a lousy writer. Dr. Stool can take a lot of heat. Call him an idiot, sophomoric, a crappy analyst, or just plain disgusting, but call him a lousy writer? Now that IS below the belt. Oooh, that hurts.

Dr. Stool has an admission to make. He is not really a doctor. In fact, he has been practicing stock proctology without a license for many years. While it is true that Stepan N. Stool did attend the Temple University School of Horticulture and Industrial Engineering, (TUSHIE), alas, he did not achieve his doctor it. This is why he does not use the appellation PHD, but uses instead, PH&D. Those of you who did go to college will 

recognize this as the Piled High and Deep. Unfortunately, Dr. Stool did not even get his MS. He did achieve the level of BS, for which he has been well recognized.

The complaint is evidently that Dr. Stool does not explain things well. To this Dr. Stool says, it's true. Like Days of Our Lives, or General Hospital, Capitalstool is a soap opera. You can't just watch once a month and expect to know what the hell is going on. Dr. Stool promises to develop the various threads over time, but he's always going to leave some loose ends. That's the way the market is. You just have to follow the evolving plots and subplots over time, and you'll get it.

Dr. Stool does have a short attention span, so it's true that the articles in Capitalstool are too short to print out to take to the John with you. If that's what you need, depending on how fast you are, try Doug Noland's Credit Bubble Bulletin, over at PrudentBear. Should give you plenty of time, and the message will definitely scare the crap out of you.

Last but not least, Dr. Stool would like to talk to you about that wonderful British custom of Prime Minister's questions. Every Thursday in Parliament, the MP's, both supporters and detractors, get to question the Prime Minister, throw bouquets and brickbats and, and yell HYAH HYAH at each other. Dr. Stool would like to suggest that if you have a question, bouquet or brickbat for Dr. Stool, or just want to yell HYAH HYAH, post it at Dr. Stool's Questions for all the world to see!

Long Term- Stocks Are a Lousy Investment (3/27/01)

OK, not all the time, but about a third of the time. And those times follow long periods of high returns, like the 1920s, and the fifties and sixties, and the last ten years, which will be no exception. For example, if you had bought stocks in 1958, ten years later you would have had a negative return relative to inflation. Well, not quite, with dividends you would have had a slightly positive return. But it got worse after that. 

In 1999 and 2000, the real, inflation adjusted, 10 year rate of appreciation on the Dow reached 12.5%, a level seen before only in 1927. Based on that, Dr. Stool guarantees, GUARANTEES, that if you bought a diversified portfolio of stocks at any time in the last two years, or if you buy at any time in the next year, ten years from now you are going to be sitting with a negative real rate of return.

How do you like them apples? By the way, Dr. Stool has no intention of making good on that guarantee. He just wants you to study the chart belowclick 
very closely. The data is through year end 2000. 

A down year this year will turn those blue and gold lines south, and that will be the final death knell. Ask not for whom the bell tolls, it tolls for thee, Wall Street charlatans. OK, so Dr. Stool is anticipating (and maybe dramatizing) a little. 

The point is, over the last 10 years we've bought our way to the most long term overbought market in the history of the world. WHO THE HELL ARE WE GOING TO SELL THIS CRAP TO, our kids? No way, the next generation will learn to hate stocks, just like Dr. Stool's generation did in the 1970s. Relative to inflation, stocks had negative real rates of appreciation over each ten year period beginning in 1958 and ending in 1968 through 1986. In other words, if you bought in 1958, you lost. Fifty-nine, same, 60, 61, 62 etc. etc. The first year you could have bought stocks and enjoyed a positive 10 year appreciation rate, after inflation, was 1977. Now there's a helluv'an argument for T-Bills. Just keep rolling them over and you'll do just fine.

Obviously, since this is year end data only, there were some times during those years when prices were weak, when you could have bought and done all right, like the 74 bottom. But on the whole, if you bought any time form the late 1950s through the late 1970's, that's, lets see, twenty years(?), you were toast. 

This is the environment we are in now. Forget stocks. Use every rally to get out. These stocks are not coming back. It's over. Our generation has blown it's wad. Party over. Stocks suck for the long haul.

Buy T-Bills, and  quit worrying. You'll start sleeping again.

Media High Colonic (3/26/01)
Suddenly, under a barrage of angry emails from Dr. Stool and Stock Proctology followers the world over, the media is saying Mea Culpa. Or are they? Not really. Caint Nobody Buy Channel says, Oh we track the analysts. Yeah, well where is that tracking. Dr. Stool has certainly never seen it. Those track records are news. Report the news galdammit. But then again, we know who's calling the shots over there, don't we Mr. GE?

Folks, we will never, ever, get the truth out of the media. They are not independent voices. CNN is owned by AOL, the corporate reincarnation of Al Capone, fergodsakes. Caint Nobody Buy Channel is run by the king of kings GE. ABC-Disney, now there's a source for reality. CBS- Viacom. Fox- Rupert Murdoch, another  unbiased source. These guys are all in the advertising business. Not the news business. If you want facts, you'll have to dig 'em up yourself. The Wall Street Journal? The granddaddy crap machine of them all. Maybe Barrons is still out there blowing the whistle once in awhile, but they too provide more than their share of support for the horseshit merchants. And does anybody read it anymore?

Never trust anything you see on the major media outlets. They are the stepchildren of the corporate junkies supporting the Wall Street dealer mob.

By going up the last few days, the market has actually increased its vulnerability to a total breakdown. The bulls better hope they can keep it going Tuesday. If the market makers and specialists can't unload those long positions that have been stuffed down their throats in the last few weeks, as well as get some big short positions back on their books, if they can't do that, next week there isn't going to be a market.

Lies and Gibberish (3/24/01)

Dr. Stool is sick and tired of making fun of the stuff spewing out of Wall Street. We are drowning in it, and it is serious. 

The Wall Street Madam was on Caint Nobody Buy Channel again Friday night, spreading the bulldung. Again, she touted the fact that Goldman Sacks the Unsuspecting Masses, reiterating that she recommended under weighting tech a year ago. This is a bunch of misleading, self-serving garbage. One, a 35% tech weighting was disastrous, especially if you tried to maintain it. Two, a 65%-35% stock-bond weighting was the opposite of what it needed to be to preserve capital. And Three, she publicly  recommended tech ten times between March 2000, and January 2001.

Then there's this Bear Market Territory horse manure. Dr. Stool is going to tear his hair out over this one. Supposedly when the Dow is down 20%, it's a bear market. So Thursday, for part of the day, it was a bearmarket, but late Thursday and Friday, it wasn't. These analysts and media types look like a bunch of jackasses with that crap. But then, they are jackasses.

A bear market is not a matter of degree. It's a matter of direction and duration. And there aren't three markets. There is one market. The Dow and the S&P are merely proxies for the market, the Nasdaq for part of it. We have been in a bear market since January of 2000. The Dow Theory confirmed the change in the primary trend in April of 2000. The market is not jumping back and forth across a line in the sand -- you're a bear, no I'm not, yes you are, no I'm not.

This is a bear market, and you must act accordingly.

Then there's that flaming idiot, James "Dow 36,000" Glassman, and all the other shills and stock apologists (the opposite of stock proctologists) who keep chanting this utter nonsense that stocks have provided an average 12% annual return over the last 100 years, (like 100 years is a normal investing horizon), and that they're the best investment for the long haul. 

Dr. Stool did a little research into this, which he will detail in a column this week. Lo and behold, what did he discover? Ladies and Gentlemen, Stoolseekers of the world. The science of Stock Proctology has just uncovered the Big Lie of the Century. The truth is that, between December 31, 1900, and December 31, 2000, the compound annual rate of return on the Dow Jones Industrial Average was, ARE YOU READY,

5.16%

There you have it.

About That Three To Five Year Horizon (3/23/01)
James "Dow 36,000" Glassman made a comment Tuesday Night on the Caint Nobody Buy Channel that caught Dr. Stool's ear. He said that over the last 100 years, stocks had, on average, returned 12% annually. Dr. Stool put the proctoscope on that statement and saw it for what it is.

First of all, what measure is that 12% by, Mr. Assman? Must be the Dow Jones Industrial Average. Dr. Stool doesn't know of any other measure that's been around for 100 years. So let's see now, how have those 12 Dow stocks done in the last 100 years. Here's one, American Cotton Oil. Hmmm. And how about Distilling and Cattle Feeding, or LaClede Gas. Then there's Tennessee Coal and Iron 

and U.S. Leather Preferred. And of course there's Nash Motors, but that came later. And how can we forget Woolworth? Here's one that came in, in 1930, Hudson Motor. Oops, let's not forget the Victor Talking Machine Company. Also mustn't forget Johns Manville and International Shoe. International Harvester either.

Buy and hold? 12% return? Somebody better tell Dow Jones about that buy and hold. 

Secondly, what the hell does 100 years have to with investing? This is a cheap trick statement from a slick, cheap trick, hustler. Dr. Stool will tell you what 100 years has to do with investing. Think of all the investors you've ever known or heard of. How many of them had a 100 year investing career? 

Most of us, if we're lucky, have an investing career of maybe 30 years. We call that an era. Your success as an investor depends largely on when you were born, and the era in which your disposable income permitted you to invest. If 12% really was the average return over 100 years, (the Big Lie if repeated often enough becomes believable), then what happens if your investing career begins late in a long period of returns double that amount. 

Dr. Stool had a great uncle who had the good sense and good fortune to become a wonderful physician during the early years of the Great Depression. He had an income when few did, and a deep and abiding faith in the promise of America when few did. He also had a bank "holiday" to encourage him NOT to put his money in the bank. So he put his money into stocks, which  back then had an archaic financial device called a "dividend."  Now that really wasn't a hard choice to make, since virtually no one thought of the bank as a safe place to put your money. 

So plowing that cash into the market year after year in the pits of the depression, when stocks had 6% dividends and PE's of 5 and 6, needless to say Great Uncle Stool did very well over the next 30 years. 

Then there is another doctor, whose initials are Dr. Stool, who, as a young hot dog vendor on the streets of Philadelphia, flush with hot dog cash, put his money into the market in the late 1960s, after 15 years of mostly rising markets. So like all enthusiastic young investors with a deep and abiding faith in the promise of America, he bought. And the stocks went up for a year. But soon the stocks went down. They were "good stocks", so he held 'em. And they went down some more, but he knew they were good stocks, and they would come back. So with faith in the future, he held, because it seemed certain that soon, the stocks would go up. But every year, 1968, 1969, 1970, 1971, 1972, 1973, 1974, they just kept going down.

In the end, what did Dr. Stool get out of buying and holding for three to five years? Severe cases of hemorrhoids and mood disorder. But you know that. 

That buy and hold, 3-5 year stuff definitely works, if you're lucky enough to be born at the right time. But if you weren't, you'd better be willing to sell 'em short. Otherwise, you'll never have any fun. 

Unless of course you can pick the ones that will be around in 100 years.

And hold 'em.

Cycle Smasher (3/20/01)
Too late to sell? Too late too sell?! This comment by the TV pundits infuriates Dr. Stool. It's as if when you sell something it then becomes impossible to buy it later. This is such garbage. If you take $1 out, you can put $1 back at any time you choose. But if you leave that dollar in, this trend will reduce the buying power of that dollar each passing week. 

The market is playing head games with you now. It's down so much, you fear that you will be selling at the bottom, and will regret it the next day or week if the market is up. This is a psychological trick we play on ourselves that keeps us from preserving our capital. We close our eyes to the reality of the powerful trend that is rapidly wiping out our portfolio. We lie to ourselves by saying that as long as we don't sell we haven't lost anything, when the truth is that only by selling, can the losses be stopped.

What is needed is a dispassionate  perspective, and an investor suffering crushing losses sees only a distorted picture of reality.

We are in the midst of a powerful and historic decline in the markets. The steep slope of the major trend is crushing short term wave motion. This renders the tools Dr. Stool uses to project short term cycle turning points irrelevant. The up phases are too small to be measured. Yet, when it comes to the longest cycles these tools have been accurate in forecasting and confirming the major trend, the phase of cycles measured in years, instead of days and weeks. And they project to much lower prices over an extended period of time.

Whatever bump ups precede the ultimate denouement will be inconsequential. Accept the fact that more than one bounce will precede the final low of the enormous wave that is sweeping prices lower. This trend is the cycle smasher.

Fight The Fed? (3/19/01)
The market is composed of three types, bulls, bears, and chickens. The bulls are the eternal optimists, like the Mother Joseph, and Joey Brassiballsia. The bears are the natural pessimists and cynics like Dr. Stool, and the chickens are the portfolio managers and anal-ists, who try to hide in the crowd, and not get caught with their pants down while doing it. 

Suddenly the chickens, who had been bullish up to a week or so ago, are now clucking a different tune. Before, it was don't fight the Fed, lower rates will boost the markets. Now it's no matter what the Fed does, the market's going lower.  

Dr. Stool has heard just a little too much of that in the past few days, and surprise, surprise, the market perked up Monday. This was greeted with an enormous wave of skepticism from the pundits. The chickens are clucking, sucerrallysuckerrally. All of which led Dr. Stool to conclude he'd better cover his shorts. The rallies that no one believes in, are the ones that kill you when you're short. And Dr. Stool hates to be on the same side of the fence as the chickens. They smell really bad. As for the indicators, nothing meaningful on the daily charts, but most of the centered moving average projections for cycle lows on the major indexes have been reached. So the chickens will all sell after the Fed squeezes one out, but then the selling will dry up, and the market will head up for a few days, under the influence of positive cyclicality. Then, of course, all the chickens will sniff their bottom again (itsabottom itsabottom sniff sniff), at which point you can put your shorts back on.

No Such Thing As Oversold (3/18/01)

The rising buzzword of last week is "oversold." People of the Bear Republic, Ladies and Gentlemen, Friends and Neighbors, Members of the A.S.S., Dr. Stool is here to remind you that, in a bear market, there is no such thing as "oversold". A market can only be overextended in the direction which is opposite to the trend. A bear market can be overbought, but not oversold.

When oscillators, like stochastics, Percentage Price Oscillators (PPO), and Rate of Change (ROC) crater, and stay cratered, the downtrend is accelerating. Prices reverse when selling decreases enough, and short covering picks up enough. What's enough? Unfortunately, we won't know until it happens. But you can forget about extreme "oversold" readings. In last week's debacle both the Nasdaq and SPX were  "oversold" while breaking down through descending downtrend channels. Click the thumbnails to see the ugly pictures. 

Nasdaq

S&P

And check out the daily charts to see the "oversold" oscillators.

The event of breaking down through a descending trendline is, in the immortal words of the world famous philosopher, Joe Kuharich, "rare but not unusual." It happens, but not too often, and you have to pay attention to it. When a descending channel trendline is broken in the same direction as the trend, the trend is accelerating and gaining strength. This is the antithesis of "oversold", and at the moment it occurs, the portent is for an extended price movement in the same direction as the preceding movement. Furthermore, it is entirely possible that the move following the breakdown will be equal to the preceding move. 

Dr. Stool is going to stick his neck out here. Based on these pictures, and long term cycle centered moving average projections, before this monster market is through, both the Nasdaq and SPX will be three digit numbers.

(3/15/01) Buy BUD- Bear markets encourage the drinking of beer. This advice today, from Hugh Johnson of First Albany, was without a doubt the second best advice Dr. Stool has heard about this market. On the other hand, Dr. Stool like his advice better. Drink BUD. Drink enough, and you won't care about the bear market.

Other than beer, Dr. Stool doesn't see much to make CNBC cheer. Seems like the conventional wisdom is moving in the direction of- "The market's close to a bottom, but it's going lower first, but there'll be a rally soon, but that won't be the real bottom."

Given that that kind of thinking seems so widespread, what are the chances that the market will give us the short term rally they're all looking for? Ha!

Ha, ha, ha. If most people are convinced the market is going lower, they are sure not going to be chasing any rallies. And who will be the buyers? The shorts have been emboldened by recent action. They're likely to sit on their positions now, rather than jumping to cover every time the market stops sinking. 

And the institutional bird droppings (aka portfolio managers) are going to continue to raise cash in anticipation of that bottom out there, somewhere over the rainbow. They won't be chasing rallies, that's for sure. In fact, they're more likely to clobber the market any time it stirs. Not because they're true bears. Because they're chickenshit, and don't want to look as dumb as they really are with the end of the quarter approaching. So let's just dump it all out before we close the books boys and girls.

Dr. Stool suspects all this because the charts are showing absolutely no sign of improvement, and no sign that a meaningful bottom is at hand. The indicators are either flatlining, or believe it or not, still deteriorating. In the short run, a consolidation is due about 2-4% lower from here, but until momentum and cyclic indicators show some improvement, there ain't gonna be no bottom.

Huge Top Complete (3/14/01)
The S&P this week completed a gigantic distributional top pattern over two years in the making. The breakdown confirms that the pattern that we all knew was a top, was in fact, a top. And it is so big, that no one should be looking for early relief. Every rally for a long time to come will merely be an opportunity to get out. To get the big picture, take a look at tonight's comments on the S&P, and have a look at the weekly chart.

The same comments obviously apply to the Nasdaq. In the long run, it too is headed a great deal lower. Bear markets, like bull markets, rotate, and tech remains the leadership. A few groups had been spared, as is normal in the first phase of the bear. But Ole Griz is taking his bite out of the laggards now. Those stock picks in the financials, defensive stocks, Dow stocks, yadda yadda, only looked smart, because they were lagging the leaders on the downside. These "picks" were actually pretty damn dumb, because they represent the absolute refusal of the Wall Street Gang to recognize that the market was, in fact, in a bear market. Next it's the Dow's turn. That breakdown from its huge, magnificent, top pattern is coming. The 9650 low will give way, and the Dow will join the rest of the pack making new low after new low. Not this week maybe, but not too many weeks down the road.

Taking A Breather (3/13/01)
Profit taking by cash laden shorts finally halted the debacle. The bulls have abdicated. The only team out there is the bears, but bears buy too - to cover their shorts when they have  huge freaking profits. In the couple of days prior to Tuesday, had you been short tech, fully margined, you cleaned up, and you're in a profit taking mood right now. 

There are a few signs that the ten week cycle low which had been forecast for the period of March 2-9 at levels just a bit higher than where the averages are now, may have simply been delayed and pushed lower by sharply descending intermediate cycles. The implication is that the 10 week cycle up phase will all but disappear. It will manifest as merely a consolidation, or even perhaps just a slowing in the downtrend for a few weeks.

The area from which prices broke down now represents overhead supply, i.e. resistance. Resistance isn't a line, it's an area, and given the shape of the intermediate trend, it will be a descending area. Short covering may drive prices briefly into those areas, but those forays will not be sustained.

Day Of Infamy (3/12/01)
Yesterday, March 12, 2001 -- a date which will live in infamy -- the Republic of Bull was suddenly and deliberately attacked by forces of the Empire of the Bear.

The Bull Republic was at peace with the Bear Nation and, at the solicitation of the Bear, was still in conversation with its Government, and its Emperor looking toward the maintenance of peace in the mutual fund industry. 

The attack yesterday on Wall Street has caused severe damage to Bull forces. Very many Bull fortunes have been lost. In addition, Bull shit has been reported torpedoed on the airwaves between San Francisco, Honolulu, New York, London, Tokyo, Hamburg, and Paris.

Yesterday the Bear also launched an attack against Germany.

Last night Bear forces attacked London.

Last night Bear forces attacked Tokyo.

Last night Bear forces attacked Singapore.

Last night the Bear attacked Hong Kong.

The Bear has, therefore, undertaken a surprise offensive extending throughout the world. The facts of yesterday speak for themselves. The people of the Bull Republic have already formed their opinions and well understand the implications to the very life and safety of the Bull Nation.

Hostilities exist. There is no blinking at the fact that Bull people, Bull territory, and Bull interests are in grave danger.

With Apologies to Franklin D. Roosevelt, and to my father, a WWII vet, and to all the heroes like him who saved the world for democracy. - Dr. Stool

Analyst Drops Big Turd, Dr. Stool announces the Blodgett-Meeker Prize  (3/7/01- Repeated by popular demand. For your daily Haley's MO on the markets, click Dowager, Nasty or SPX.)

Dr. Stool was so inspired by the Mother Joseph Superior getting even more bullish Wednesday morning, he right away got in the Packard and tooled downtown to see his customer's man at the E.F. Hutton office. He told the customer's man to put in an order to go 200% short on a bunch of tech stocks. The customer's man got the order in about 9:45, and guess what, Dr. Stool was up 5% on the day. Way to go AJ Miss The Turn, I Don't Follow the Nasdaq, SPX 1650 Cohen. You are the best strategist in the world by far! Dr. Stool has never failed to make money off your calls.

In honor of the Mother dropping the big turd, Dr. Stool is unveiling a concept he's been working on for some time. 

The Blodgett - Meeker Prize
 for Analyst of the Year

Capitalstool.com will be awarding the B-M Prize to the analyst who has gone above and beyond duty's call, and nature's call, in furthering the aims of stock proctology to help investors make the right decisions to protect their portfolio asses. The analyst who wins the B-M Prize will be unwavering in analytical acumen, commitment to the goals of the  Wall Street brokerage and investment banking community, and professional ethics. 

Dr. Stool requests that readers assist in the process of selecting the recipient of the B-M Prize. Please make your nominations at Stool Pigeons on the Wire. Use the Analyst Droppings Forum. All nominees will be given fair consideration, but ultimately only one will stink out above the others. 

Beware The Consensus (3/6/01) 

Regular readers know that Dr. Stool has projected the current action as a ten week cycle low, with a nasty little rally phase to precede the big dump to Dowager sub 10,000, Nasty sub 2000, and SPX sub 1200.

Suddenly, Dr. Stool finds he has lots of company. Now the consensus isn't always wrong. It just depends on which way it is moving. The shifting consensus reflects the movement of the underlying portfolio assets run by the consensus makers, to, from and between asset classes.

So the consensus makers suddenly are looking for a good reaction rally, before a final bottom in mid year. Uh oh! 

Based on proctologic probing into the depths of bear market psychobabble, Dr. Stool concludes that the consensus makers will be wrong on both counts.

The charts say that the shift of assets out of stocks will be long term in nature. Ladies and gentlemen, we are in the mother of all cycles. The greatest bubble in the history of the world will not end in a one year bear market. There are precedents, and those precedents say this bear will go on and on and on. The idea of a mid year bottom is just more wishful thinking, because the consensus makers haven't really done any selling yet. But eventually, they will.

Now, Dr. Stool's charts say there will be a wee little rally here, which will again disappoint the consensus. Because in the back of their minds the consensus makers are thinking, I don't really believe this bottom crap, I'm gettin' out on the next good rally. Only problem is, there is no "good rally", because the smart money is selling and shorting every "good uptick." So those good upticks can never pile up into a really good rally.

Oops, suddenly the consensus makers realize, "ain't no good rally coming," so what do they do. Well they start feeling a little shaky in the old lower G-I. Next thing you know, it's loose stools all over the place. The consensus makers spoil their own beliefs by dumping every chance they get. Now that will  eventually generate a good rally, just around the time they expect one, around mid year. But by then upside will be too little too late. Chances are, the rally the poor bastards are looking for won't even see today's price levels.  

Attention All Bears- Warning (3/3/01)
Your friends are your enemies. Now, what the hell is he talking about? 

It's like this. As the market eases into a ten week cycle low, which is assuredly going to be choppy, and may or may not stab a bit lower over the next week or so, who do you think will be doing the buying? The bulls?

No way. They are crapped out, and frozen in hope. They're scared to death of this market, and can't bear to even look at their decimated stock prices. They are simply locked in to a position of blind hope. No buying, no selling. That leaves a vacuum.

Now who do you suppose rushes in to fill that vacuum. You got it. Us. The bears. The shorts, the nattering nabobs of negativism, the denizens of darkness, the purveyors of gloom and doom. (God, that was fun.)

And, what's our position right now? We are flush, our pockets are bulging with the cash that we are steadily building up, interest free, in our short accounts. Are we smart or what? We are actually gettin' paid to borrow. Ain't it grand? But some of us, wisely, are getting just a liiiitttllle nervous about all that money we've made these past few weeks, so what are we doing. We're taking profits. And how do we do that? There's only one way that Dr. Stool knows of. WE BUY, to cover.

There's just one problem. There's no damn stock for sale, ohmagod! Remember, the bulls are frozen in hope and depression. Their losses are so frickin' huge, they are either locked into that idiotic mindset that it's too late to sell, or they're so depressed, they just don't look anymore. 

So the shorts are the only game in town, they're way too short, (new figures this weekend), and there's not much stock for sale. So what happens? Profit taking by shorts goes vertical due to lack of supply. That's the risk we face over the next couple of weeks.

We've all been through it. That's how it works. The market is not about business. It's not about investing. It's not about fundamentals. It's about gambling, emotional immaturity, salesmanship, hucksterism, and the cycles of supply and demand, profit and loss, greed and fear. 

Now if you understand all that, you understand why bear market rallies are so ferocious, and why, when the conditions are right for one of those spikes to develop, you need to stand aside. The coming week is one of those times where the conditions will be right.

Are we there yet? (3/1/01)
Pretty damn close. Friday is day 49 of the ten week cycle. Dr. Stool lost count from the December 21 low. He was projecting  March 9, as the "inflection point." 

Dr. Stool has heard a lot of analysts on the CNBC Shill channel use that term. (Our friend Bill Fleckenstein calls CNBC -Cheerleading, Nothing But Cheerleading). Inflection point. Dr. Stool doesn't know what it means, but it sounds good. Aside from knowing how to count, which is not a prerequisite for being a Wall Street market strategist, it's very important to say things that make you sound like you know what you are talking about. Since nobody else knows what the hell you mean, this used to work. Now that we have stock proctology to guide us, we know better, don't we.

Anyway, so it's day 49, and it's been a real bear party these past couple of weeks. So what do you say bears? Time to be a pig, or time not to get slaughtered. Let's not get slaughtered, shall we, and just take a short breather from being short, ok?

The Dow got down to that objective of 10,300, twice now. What the hell more do you want. So the SPX and Nasty fell shy by a %. And yes they could still spike a little lower. But if the bulls aren't dumping all over the place, and they're not, then who dominates the trading? That's right, the s-h-o-r-t-s. And if stocks have short interest up the kazoo what happens? You got it. SQUEEEZE!!!!

Dr.Stool thinks this little up phase that's due will be just what the doctor ordered to take the pressure off the short side. Think of it as a correction in reverse. But after the wave of short profit taking and bumpkus covering is over, what's left in terms of demand? Nothing, absolutely nothing. 

It's just that those squeezes can be damn painful. Take it from the stock proctologist!

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