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Dow Jones Industrial Average- January Archive

Dead Man Walking (2/21/01)
What more can Dr. Stool say? It's over. Yes, bears, our long national nightmare is over. There's no longer any place for the bulls to hide. The enormous trap set by the Dow over the last year has finally been sprung. There is nowhere left for the bulls to rotate their money. A mass, long term exodus of public money out of the stock market is under way.

The decline went far enough yesterday to at least generate very short term price objectives based on the centered moving average technique pioneered by Hearst in 1970. It is still the best method Dr. Stool has ever seen for forecasting highs and lows. (Does Dr. Stool have a book to sell? Profit Magic of Stock Transaction Timing ) The longer term is still fuzzy due to the Dow's wild gyrations over the last 12 months, but the short term projections, over the next day or two, are pretty clear, 10,350 +/-. 

At that point the cycle timing, and position of the stochastics oscillators will be about right for a 6-10 week cycle low. Don't expect much of a rally though. With longer duration waves rolling over, the most you're likely to see is a brief sideways movement or drift before the downtrend resumes.

The longer term projections are going to be much lower. It's just too early to tell how low. Using conventional techniques the break of 10,500 projects a low of 10,000. A break of 10,300 projects to 9,600.

The Bear is in charge.

Following The Script (1/31/01)
Well so far so good. The Dow reached the minimum price objective for the shortest cycles, and sold off after the Fed dropping. Dr. Stool thinks that these very short term sell signals will evolve into sell signals on the daily charts. 

Applying the straight edge proctoscope (aka ruler, or piece of paper) to the Dow's recent highs on the daily chart,  Dr. Stool could see that the intraday high coincided nicely with the downtrend line established by the previous highs. That combined with the fact that stochastics are extended, and measuring objectives have been met, suggests that the market will have difficulty advancing further over the next few days and weeks. 

Whether this is the beginning of a new major leg down will only be confirmed by downturns in the longer term stochastics and PPO.

Whoa! (1/30/01)
If this market wasn't in the same damn trading range, Dr. Stool would be impressed by that move. But, he remains a skeptic. Not very smart perhaps, since the excess liquidity created by the Fed clearly has found its way into the market, but Dr. Stool is a doubter by nature, and a bear by birth. 

Be that as it may, the short term upside objective has now risen to 10,950-11,000, from yesterday's 10,800. That would give this rally a nice symmetry, and put an end to it.

On the Brink (1/29/01)
The Dow put in a five day cycle low Monday morning. As a result of this rally, Dr. Stool is now able to project an upside objective of 10,800 for the four week cycle high. That should contain the rally in the short run, coincident with the Fed's loosening due Wednesday. 

Meanwhile keep and eye on the 15 day rate of change, the 52 day stochastics and the longer term PPO's. They're still stuck in neutral. there are signs of a low forming in 3 1/2 month cycle week cycle, BUT, as we all know, frequencies and amplitudes vary. After three nearly perfect waves, Dr. Stool would not be surprised for different wave begin to dominate. So Dr. Stool isn't too worried about this little rally, but it bears watching. 

You are getting sleeepy... (1/26/01)
verry sleepy. Dr. Stool would like to say something intelligent, an oxymoron in itself, but looking at the Dow daily chart makes him feel like taking a nap. 

Dr. Stool can't imagine this resolving to the upside, but that doesn't keep him from worrying about it. The next four or five days are a period when cyclical forces should be weak. But time is running out on the intermediate cycle low, which appears to be due at the end of this short term down phase. If the weakness that is due this week, isn't really weak, the indicators would be in a position to launch a  hellacious rally.

At this point, there's simply not enough data to project even a short term downside objective. Even fiddling with the dials of the proctoscope, the view is still pretty much the same, a neutral shade of brown everywhere. Most of the indicators are ever so slightly below neutral, but not enough to make a stock proctologist feel comfortable. We'll just have to wait for the other shoe to drop, hopefully Monday. 

Bulletin! Dog Chases Tail! (1/25/01)
All that new money, and the best it can do is chase itself around in circles. Dr. Stool remains unimpressed by the little upticks in the proctolators on the daily chart. Intraday, and short term centered moving averages say that the pitiful rally in the Dow topped out Thursday. The price objective was 10,740 based on the previous day's readings (see below). That only adjusted to 10,780-10,800 as a result of 83 point rally. If this is really all the dowager can get the bulls up, then maybe Dr. Stool and friends can resurrect the crash scenario, after all.

Playing With The Proctoscope (1/24/01)
Dr. Stool took a look at the Proprietary Proctoscopic Oscillator (PPO), better known as the percentage price oscillator, on an intermediate basis, hoping for some clarity as to how this trading range will be resolved. The indicator shows the Dow has had a consistent 3 1/2 month intermediate cycle. The current cycle is now three months old, and should be heading down hard, but isn't, thanks to the Fed's heroin injection.  A down is overdue here, but the upside objective of 10,700-10,740 should be hit first.

The size and shape of the down phase holds the key to whether the bulls get to do some more kickin' and snortin'. For now, neutrality rules.

Suspended Animation (1/23/01)
Dr. Stool is changing his forecast. He now thinks the Dow will trade in a flat trading range-- forever. Wouldn't that be special? But that's where everything's pointing right now. All this peace and quiet is just too stressful.

Unfortunately for bears, there are enough signs of accumulation here to be worrisome. The proctoscope is showing a pattern of rising bottoms on a number of indicators. That, in itself is not troubling. But a rally launched out of that kind of pattern could have squirting power. Let's see what happens when it tries to test the recent intraday high at 10,740. 

Of course if Dr. Stool does turn bullish, sell everything. It's a contrary indicator.

Hangin' (1/22/01)
The suspense is hard to take. But, all stock proctologists know that these things move at their own pace. The market continues to digest the Fed's overfeeding, and in due time, it will, ahem, do its thing. The daily chart continues to look like the Dow is sitting at the edge of a cliff. Look out below.

Herbert  Hoover and Humpty Dumpty (1/19/00) 
Now that President Hoover is in office what do we have to look forward to? Here's a chart that explains it. (requires Adobe Acrobat.) True, a bit retrospective, but you get the idea.

Dr. Stool examined the Dow in the proctoscope tonight and saw a rare confluence of warning signs, so rare, in fact, that only a very few market historians even know of the existence of these rare signs. Dr. Stool would first like to call your attention to the daily price chart. Here we have what is called the Pregnant Chad formation. This is the formation where the indicator almost, but not quite, pushes through the resistance. As a result, President Hoover is elected, and the market falls dramatically. The same formation can be seen in the stochastics indicators, which not coincidentally, were unable to get more than 50% in the Hoover pre-inaugural rally. A Pregnant Chad formation which fails to reach 50% before the Presidential inauguration is a sign of big trouble in the hinterlands, and on Wall Street.

Next Dr. Stool wants you to look at the 10 day Rate of Change (ROC). Here we have the infamous California Cliff Dweller formation. The Dowager has  now walked down the hill to the edge of the cliff. When the lights go out, she loses her balance and falls to her death on the rocks below.

Finally, Dr. Stool illustrates long term momentum with the 100 day ROC. This indicator is in the nefarious, and dreaded, California Power Degenerate formation. Note the long slide in this indicator showing the market's gradual loss of power since August. 

It is a rare event indeed, for all of these formations, the Pregnant Chad, the California Cliff Dweller, and the California Power Degenerate, to be seen on a chart at the same time. But there is a final, even greater danger to add to the picture, the horrifying Humpty Dumpty formation on the intermediate Percentage Price Oscillator (PPO) at the top of the chart. You see Humpty sitting at the edge of the wall, and well, you know what's next.

Dr. Stool Eats Metal (1/19/01) 
The Dowager almost emerged from her short term bottom baseline at 10,680. If she manages to do it in the next session, the price objective is 10,900. Dr. Stool hates to use words like if. But cut the guy some slack. He's been wrong for a couple of weeks now. Like analysts who actually get paid for this stuff, Dr. Stool sometimes relies on the use of "iffy" forecasts to avoid responsibility. (See bm effect.) 

Still, Dr. Stool continues to insist that no significant buy signals have shown up in the proctoscope. However, there are patterns of rising bottoms on the daily chart oscillators, that Dr. Stool will keep an eye on. After all, looking at the rising bottoms is the stock proctologist's job. 

Market makers, Please wash hands when finished. (1/18/01)
Man are those guys predictable. (See below) Dr. Stool is quite certain, that this is finally, at long last, the end of the top formation process in the dowager. Why? If this market were rally going to take off, Wednesday was the day. They sure had 'em going in the AM. But the pros took it all in their short accounts, dropped the lid and flushed around mid session. 

The next key is, what happens at 10,520. If that trendline does not break now, the Dr. Stool is, quite certainly, wrong. 

Ugh, Here we go again. (1/16/01)
This gets so tiresome. It's almost enough to make a bear give up the ghost. Every time the Dow gets to the edge of the cliff, a few big shots get together to prop things up. This stimulates short covering and bottom picking. All that bottom picking is exasperating to a stock proctologist like Dr. Stool. 

There's nothing on the daily chart to indicate that this is anything other than a 13 day cycle low. The amplitude of this wave has recently been around 300 points. So there's a chance that the Dow could run to 10,800. But, note that there are no buy signals on the chart. There's also intraday resistance at 10,680. So this could fizzle.

Seepage (1/14/01)
Dr. Stool says, repeat after him. The Dow doesn't matter, the Dow doesn't matter. And what was that dripping we the last seven days. Drip, drip, drip. 

Dr. Stool remains incredulous that analysts would actually have the gall to say the Dow doesn't matter. Dr. Stool is of the old school. He reveres the Dowager. Oh sure they rev her up every so often, but it's not an accident the she's carried the weight she has so well for all these years. She doesn't get caught up in short term fads, just a steady diet of the real thing. And right now she's really beginning to show some sag. Them cheeks is hangin' baby! Ohmygod her shorts are showin! Oh it's so ugly, the pundits are averting their eyes. See no evil. The Dow doesn't matter.

Take a look at the daily chart below. (Scroll baby scroll.) The longer stochastics and rate of change oscillators are indicating that the 4-5 month cycle is rolling over. That's that great intermediate cyle that swing traders love. It's over three months old, which leaves three or more weeks of weak cyclicality ahead. President Hoover's inauguration looks like it could be a chilly one. Wear a long coat, and keep those cheeks warm, Herb. The rest of us will be in our shorts, and loving every minute.

Neglect (1/11/00)
Dr. Stool just heard that the Dow doesn't matter- only thirty stocks. Ok, let 'em ignore it. The 5-8 day cycle, which has been rising for 3 days is near its peak. A look at the chart below doesn't show anything to be hopeful about. Dr. Stool supposes that's why the pros want to ignore it. Make no mistake, the Dow is still pre-eminent. When this consolidation cracks to the downside, the pros will notice, and they will take the whole market down.

News? What News? (1/10/00)
Wednesday's uptick should be the last gasp of the five to eight day cycle up phase. Dr. Stool heard there was news after the bell. The essence of stock proctology is to study the charts and avoid the news. The news follows the charts...eventually. 

Doctor, I don't know how much longer I can hold it! (1/9/00)
The old Dowager is slowly but surely sinking toward her last line of defense, the lower trendline of a three month triangle formation. Every indicator on the daily chart is now pointing down. Cyclicality is growing more negative each day. That 5-8 day cycle that Dr. Stool talked about yesterday stayed positive Tuesday, but barely, and the amplitude of the wave is minor compared with the 4-7 week cycle that is just now topping out. Dr. Stool believes that the Dowager's digestive difficulties will become apparent for all to see by the end of the week.

Finger in the Dike (1/8/00)

The Dow came back from the brink Monday afternoon. The technical picture has not improved however, except on intraday indicators, which suggest a one or two day rally from here. The intraday charts confirm that an intraday downside target of 10,520 was met. The 5-8 day cycle is now in an up phase. If it can get above 10,625, the price target would be 10,725. 

Dr. Stool is a little surprised that the market didn't come apart. A lot of powerful people have a lot at stake, and have apparently drawn a line in the sand, or perhaps finger in the dike is a better way of looking at it. JP Morgan and others did similarly in 1929. The pressure will be on for the next two weeks. If the big money can hold on and stem the tide over that time, then the worst will be over for now. Keep an eye on the 52 day stochastics. If that breaks below 50%, the market will break down.

January 7, 2001
The shortest bull market in history (1 day) has ended, and Dr. Stool, super bear that he is, does not lament. Dr. Stool hopes that those unfortunate enough to have an optimistic frame of mind, have taken precautions. He continues to warn investors of the risk of a crash. Looking at the Dow chart in the proctoscope, Dr. Stool sees the market liquefying. In other words, panic.

On the heels of that one day buying panic, the next step is selling panic. As sure as night follows day, crash follows mania.

The rally was never confirmed on momentum oscillators (Rate of Change and PPO- Percentage Price Oscillator). Now both the 3 week cycle and 10 week cycle oscillators have given sell signals. The 4 month cycle is also rolling over. The next two or three days are a period when virtually all trading cycles, from five days, to 20 weeks are in gear to the downside. This is a recipe for a crash, when there is enough fear.

It's too early to project downside objectives for this move using centered moving averages, but Dr. Stool expects the Dow to test 10,300 immediately, and fail quickly. That sets up a downside of 9,600 for the short cycles. If that breaks within a day or two, look for an attempt to recover, followed by a move to 8,300 by the end of January. 

That's speculation at this point. After a few more days, it should be possible to make more definitive projections.

Many bears injured, some killed as Fed fires starter gun (1/3/01)

The early surprise move by the Fed caused carnage among the bears. Dr. Stool wrote in the last two columns that if the Fed fired its pop gun early the markets would go up 10% in 2 hours, churn around and then fail. Still, the move surprised the stool out of your stock proctologist, and everybody else for that matter. While the good doctor expected it, he sure didn't think it would come today, fergoshsakes. So he got creamed. 

Does Dr. Stool still hold to the second part of his forecast; that the rally would churn around, then fail. You bet! The intraday cycle measuring objective is 11,100. The 35 day cycle target is  10,950. Hmmm. Seems we did that already.

The other thing that strikes the doctor is the non-confirmation in the 17 day rate of change on the daily chart below. This is a normally reliable indicator, and Dr. Stool interprets this to mean that the rally is not sustainable.

So for now, look for an attempt to move higher that gets pushed back. This was a knee jerk reaction rally, based on something that the whole world knew was going to happen, and had game planned for. The market's a re never so kind as to accommodate "everybody". Dr. Stool thinks the bears will be  off the mat in a few days. 

Update 1/4/01

Welcome to the shortest bull market in history. The shortest term cycle objective, based on intraday charts is 11,020. This was reached on an intraday basis Thursday. The 4-6 week cycle objective is now 11,100 to 11,200. That will adjust each day as the top begins to form.

There's solid resistance at 11,000, both from the level of the previous peak, and from the top channel trendline Over the last two months. Momentum indicators are weak and stochastics are in a top zone. The bulls have shot their wad. The fat lady is about to sing.

Stepan N. Stool PH&D