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Nasdaq Composite Comments Archive- AprilArchive of Nasdaq comments January, February, March, May [adbox-upper.htm]By
The Book (4/30/01) Markets rarely turn on a dime. If your stock proctologist is interpreting this action correctly, the topping process is now eight days old, which of course means that the "bull market" (up 20%) in the Nasty has lasted eight days. That means that the holiday is over as of sundown Monday. A close below 2075, with concomitant downturns in the cycle oscillators on the daily chart would confirm that the 6-7 week and 10-11 week cycles had begun their down phases. If the Nasty manages to stay above 2075, it'll mean the inmates have taken control of the asylum again. Bastard
Child (4/27/01) Or are they still leading? Now the Nasty certainly will join the party Monday, assuming there is one (one never knows in this cockamamie market). A test of the high at 2200 would be in context, even a false breakout can't be ruled out. But beyond that, time has run out. Take a look at the 26 day rate of change and the price chart. You'll see that the 10-11 week cycle highs have had nice spacing, just about every 10-11 weeks. The market is at the point when the cycle high is due, the indicators are in the right config, and the emotions you see out there amongst the market strategists are just what you'd expect at a top, euphoric ignorance. The ignorance is, of course, a constant. Warning Shot (4/26/01) That little selloff Thursday afternoon was the bears' first warning shot across the bow, as the short term cycle top continued to round over. The bulls' failure to extend the rally in the afternoon indicates that demand from the mental institutional buyers is beginning to wane, and that market makers have built short positions to the point that they no longer want to immediately support prices when the portfolio shrinkers withdraw. Still there's no confirmation of a downturn in the 6-7 and 10-11 week cycles yet. Upside price projections have edged down a bit, now ranging from 2160-2180 for cycles from 13 days to 10-11 weeks. This suggests that the intraday high of 2202 was the peak, but there's a chance they'll try to mount one more rally before opening the trap door. Keeping Hope Alive (4/25/01) The dealers gave the market a little goose, as they needed to, in order to build their short books, and the portfolio shrinkers all grabbed their heinies (Ooh spellchecker doesn't like that one, hinnies, heinous?)... Ok so they grabbed their heinous anuses and jumped to the buy side in the afternoon. This of course made the dealers very happy because it gave them someone to short to. So the reaction toward the high is under way. The bulls naturally think this is the trend getting in gear again, but looking through the proctoscope, Dr. Stool sees it as just another day of echoes of manias past, helped along by the cynical manipulations of market insiders doing their best to separate customers from their money a little at a time. Let's face it, they don't want to do it all at once. They'd have no market. Wall Street needs suckers. The Street lives, breathes, and eats suckers as part of its normal daily regimen. The dealers want people like you and Dr. Stool to keep pouring our money into the market, so they can continue to extract it. So they do their level best not to wipe everybody out all at once. A steady flow of little losses suits them much better. What they want is to "Keep hope alive!" Because as long as investors have hope, they'll keep right on buying and losing week in and week out, month in and month out, and year in and year out. The only way you can beat that is to play it the way they play it. And the only way you can hope to decipher what the hell they're doing, through the confusion, obfuscation, and dung, is by studying stock proctology! If you do that, you at least have a chance. As for the Nasty, no change in the forecast. It's building a top, and that takes time. This is the period during which public misperception and confusion builds, but stock proctology begins to grow more confident. The indicators are in top zones, the centered moving average projections are still pointing to the same range they pointed to yesterday and the day before, and all looks to be in gear to begin to round out the highs. There are no significant downturns in the daily chart indicators yet. So be watchful, be patient, for a few more days, but as soon as you sense the bulls are weakening in their resolve, move in for the kill, and get short with the pros. The
Unkindest Cut (4/24/01) So here we are back below a declining 53 day average. Last week, the market was repriced upward to reflect lower competing yields, and still we are down from the point just before the repricing. And, what have we here? It seems centered moving average projections for cycles from 13 days to 10-11 weeks have ratcheted down to 2100-2180, which is turf we've already covered. The daily indicators are also very close to confirming that the Nasty has topped out, and will soon be heading into the down phase of the cycles. In fact, it's now possible to make very preliminary downside projections for the 8 and 13 day cycles. Looking through the stock proctoscope your stock proctologist sees the Nasty coming down to its first constriction at 1910. It's early of course, and it would be nice to see the indexes do some churning up here before falling apart in the weeks ahead. But don't fall asleep on the couch, and get ready to put your shorts on. Summer's on the way. Just
Desserts (4/23/01) Now comes the indigestion phase. Dr. Stool is willing to bet that not only did the market making clique get sold out of their longs last week, but they also got short to their hearts content. What they want now is an orderly decline that allows them to take profits without competition from public buying. They'll sell it down a little then buy a little, to suck in all the Myron Cant Tells out there who believe the new bull market is here. But they'll stay net short, and they'll continue to meet any demand blips with their short selling, while encouraging the market to fall gradually. There's something Dr. Stool wants you to look at on the daily chart. He theorized as this rally was getting started that the market would go into a "sideways up phase." Now look at the 21, 33, and 53 day moving averages on the chart. What do you see? Only the 21 day average has turned up. The 33 day average is flat, and the 53 is still headed down. The price has dropped back below the 53 day average. This is virtually the same behavior the cycles exhibited in the last rally back in January. Yes this rally was bigger, but only because we got a little stretched on the downside. Otherwise, this looks like business as usual. The upside projections for the 13 day through 10-11 week cycles have congealed around 2260-80, which is higher than we got in the rally. But one more day like Monday will bring those projections down, and confirm that we've already seen the high. The
Difference Between Gas and Light
(4/21/01)
This monthly chart of the Nasdaq goes back to 1990. It's obvious why the market rallied as it did here. It's also obvious that the rally is insignificant on a long term basis. The downtrend is intact. Long term mo is abysmal, and there is no sign of a trend change. The momentum indicators portend that eventually the long term secular trend support line will break down. The silly people who base their stock valuations on comparisons of earnings yields with long term bond yields, (and we know who they are) are in for a serious rude awakening real soon. For ten years, rising bond prices have supported ever higher PE ratios. It went on for so long that portfolio punks drove PE's into an exponential rise. Being the silly people they are, they assumed that earnings would rise, and bond yields would decline, forever, a moronic assumption which resulted in a bubble. Well, the Fed may try to pump gas on the fire by farting up money and credit, and driving short term rates to zero, but the guys and girls in the bond pits will have none of it. The bond market is about to go to hell. Those who follow the market strategists' advice to sell bonds and buy stocks are only going to be half right. Because corporate profits are piss-poor and the valuation prop of low long term yields won't be there. As a result, this time, stock prices will collapse along with bond prices. People are going to sell both bonds and stocks.
Whether this massive historic short squeeze in the Nasty ended last week, or ends next week doesn't matter. It will end. Too many people were massively short stocks and derivatives, the bulls knew it, the Fed knew it, and they took us to the cleaners in an attempt to kick start the market and the economy. It won't work. The trends heading in the other direction are too powerful. The markets can be detoured for a month or two, but eventually they will go where they are going, which is down. Now back to the short run, which is where we live. In the long run we're all dead, right or wrong about the market. It's always a good idea to keep that in mind. The long run is only relevant in terms of the limitations it places on the day to day. In the short run we had a panic, a crash-up, if you will. Indicators reached historic extremes for hysteria. The rally was driven by fear, conspiracy, and margin calls, and that simply will not stand for long. The first signs that we are nearing the end of this cropped up Friday on the stochastics on the daily chart, below. As far as cycle projections, with the caveat that Dr. Stool blew these last week, we're now looking at a projected high of 2200 on the 10-11 week and 6-7 week waves, and 2160 to 2280 on the four week cycle. The 13 day cycle points to 2200-2210. Dr. Stool thinks that the Nasty topped out on Thursday, or that if it didn't, any further upside extension will be very limited. There is only one logical conclusion. This unique confluence of factors and events, i.e. the huge short interest in stocks and derivatives at the approach of options expiration, the Nasdaq reaching long term trend support, the strategists calling for portfolio shifting from bonds to stocks, and the Cutter in Chief cutting the big one, is a one time deal, and it's just about spent. Dr. Stool doesn't think any of this was coincidence. But whether it was or not doesn't matter. The money has been created and spent, and the market will now go about its business of destroying it again. Bull Market or Biggest Bear Market Rally of All Time? (4/19/01) The market is an equal opportunity destroyer. The bulls had their turn in the barrel, and the market is now extracting its tax from the bears. Dr. Stool was wrong about this rally. He forecast a sideways trading range off the lows, with a high no greater than 2000. Day after day the ascent pushes those targets higher. The size and shape of this rocket now make it impossible to project a high on the 10-11 week cycle. The 6-7 week wave forecast high now has jumped to 2200-2340, and the four week cycle high projects to 2360. On an arithmetic scale the major trend downtrend line is at current levels. On a log chart, the line is actually a little higher, about 2250. Unless those lines are breached and then successfully tested, this still has to be considered a bear market rally. The 21 day stochastics has reached 100%. Dr. Stool can't remember ever seeing that before. The level of hysteria is unprecedented. Also, the Nasty has yet to approach the 87 day moving average, and remains light years from the descending 200 day moving average. The folks who called for a massive rally were right. Dr. Stool gives them credit, although he knows they just pulled those predictions out of their butts. This time they got lucky. The market freely rewards stupidity, and punishes prudence, far more often than we would like. At this point, this still looks like the mother of all bear market rallies. It will end, soon, but whether it's in a day, or a week, is impossible to say. The last rally lasted 22 days from the first bottom. This one's 12 days old. If it lasts 22 days...you're looking at a moon shot. Dr. Stool was dead wrong to have predicted a top here. It was wishful thinking, not cold blooded analysis. Cycle projections are sometimes wrong. The rewards go to those who follow the indicators. So far those indicators haven't said sell, although they're sure as hell flashing yellow. Nasdaq Drops 50 Points (4/18/01) And that was only in the last hour and a half. Of course, it was up a little, earlier, but hey, who's counting. For bears, Wednesday was the Nightmare on Wall Street, The Return of Alan Greenspurtz, shortkiller. When Greenspurtz is in town, those shorts better run for cover, 'cause you never know when he'll squirt that money cannon. He is an eggspert in the element of surprise. Well, there should be enough money in the markets now to really get those inflation fires stoked up good, but what the hell, the bulls get a one day party, just like Dr. Stool said here yesterday. (see below) And if it was a little bigger than he thought, no big deal, right? So back we go to the stock proctoscope, and through that cloudy lens Dr. Stool sees some cycle projections. Wait a minute, need to wipe off that brown stuff. OK, let's see, the 8 day cycle points to 2100-2120, the 13 day to 2040. The 4 week cycle points to 2060, the 5-6 week to 2100, and the 10-11 week to 2100-2140. Gee, looks like we're there to Dr. Stool. 'Course, that old stock proctoscope is covered with that brown stuff from old Greenspurtz. The question is does he have any more gas left? By George, They're Gonna Do It (4/17/01) Dr. Stool's been speculating about this in these columns for a week or so. Be sure to have Caint Nobody Buy Channel turned on Wednesday morning when the Nasty cross the "magical" 1966 level. Who will have the privilege of speculating about Actually it's not funny at all if you went short a couple weeks ago, or worse, last week. It'll be pretty damn scary. The fear the shorts feel is the same fear the bulls feel when the market reaches a selling panic bottom...sheer unadulterated panic. That along with calls from Mr. Margin, should set this thing on its ear. The portfolio punks are giving it their best, last shove, hoping for a miracle. They won't get it, and a couple of months from now, a lot of them won't have jobs. But for Wednesday at least, they'll be crowin' and clucking, and feeling pretty good about themselves. The high of this phase is now within 5% of Tuesday's close, which is nothing for this index. All short term cycles are pointing to peaks of 2000-2040. That will be the final pop. Probably won't be straight down after that, as the money managers try to support their mindless acts of violence against your future with even more buying of the dips, but their little party will be over, that's for sure. Is
the Party Over Already? (4/16/01) The upside objectives enumerated below dropped a little as a result of Monday's dip. Because there's really been no change in the slope of the intermediate downtrend, it's not surprising that those projections keep dropping. They've now dropped to the 1980-2040 range, with the bulk below 2000. Last Thursday may have been the high water mark. The market may give us confirmation of that any day now. Finally, don't be concerned about the crossover in the 24 day Percentage Price Oscillator. Dr. Stool uses that oscillator primarily as a check on the condition of the 10-11 week cycle. Always remember this is a bear market. MACD and PPO crossovers are almost always late in a bear market, and what's left of the rally after the signal comes is usually, zip. Let the major trend govern your trading. The
Devil Made Me Do It (4/13/01) So this bear-killer rally is going to go a bit further, and in so doing, insure another slow-motion collapse, down the road. You can bet your bottom dollar the people behind this thing are not gonna quit until it breaks 2000. The market makers and big fund managers are having a ball running the shorts. Once the Naz does break 2000 and the media air is filled with shrill hysteria about the 20% gain, bull market yadda yadda, the market makers will step in and begin rebuilding their own short positions. That will put a stop to the rally. The unfortunate thing is that the portfolio managers who are charged with managing your retirement funds, and who have been the ones gunning the accelerator in this rally, are going to leave you holding the bag. If you have your money in mutual funds, you really should think twice about letting these people hold your future in their hands. In a bear market, it is guaranteed, GUARANTEED, that they will always give you the wrong advice, and always do the wrong thing at the wrong time. Remember that first selloff a year ago, when they told you how important it was not to panic? That's exactly when you should have been panicking. Think about it. They can't tell you to liquidate. They'd be putting themselves out of business. This rally is giving you the opportunity to do what they won't do in your behalf. Take advantage of it. Now, how much more can we expect. Most short term cycle price objectives remain in the 2000-2030 range. That's less than a one day shot form here, so be on your toes. There's going to be a lot of fireworks around the 2000 level, and a lot of baloney about the rebirth of the bull. And things might even stabilize for a while as the sideways up phase of the 21 week cycle progresses. A trading range will develop, and the pundits will call it base building, and tell you to buy stocks. In fact, just the opposite will be true. It will simply be a period of quiet consolidation in the bear market. The downtrend will resume in time, with much lower lows to follow. You may be feeling some fear of missing the bottom. Be aware that it's just the work of the devil. So if you do buy some crappy stock that goes down, AGAIN, and your spouse finds out, you can have an answer when he or she asks you what the hell you were thinking. Just say, "THE DEVIL MADE ME DO IT!" (Apologies to the memory of the great Flip Wilson and Geraldine.) Crash-Up
Day 3 (4/11/01) If it happens, it will prove, once and for all, that calling a bull or bear market by whether some index is up or down 20% is sheer idiocy, garbage, nonsense, and crap. But this is what we get from the financial media all the time. So lets see if the market can expose them for the Bozos that they are once again. Maria Barfanuhuh. Pffft. Anywho, this ridiculous farce goes on. Like clockwork the bear rallies come every couple of months, driven by panicked short covering, with good reason, of course: a 50% up move on the opening and you are DAID. Over, finished, kaput, sayonara. Then of course there's the mindlessness of the analysts calling a freaking bottom because things are so bad, they don't think they can get worse. They can, and they will. At its high Wednesday morning, the Nasty reached or got to within 5% of most cycle peak projections. There are still some outstanding unmet projections of 2000-2030, but that could easily adjust down. The hourly stochastics for the 8 day swing trading cycle are overbought and weakening, but have not yet definitively signaled a top. So let's hold out for that 20% gain from the low, just for the fun of it. It would be worth the price of admission. No
Surprise Here (4/10/01) What happens when panicky bulls are finished with their climactic dumping of stocks is that the shorts then completely dominate the trading activity. When the conventional selling dries up, and short interest is at high as it is, there is a literal shortage of stock for sale. Bears, i.e. shorts, try to cover their short positions to take profits. The withdrawal of forced selling by the bull side means that prices must rise. Several times over the last week we had orgies of forced liquidation which finally exhausted themselves. the after effect is that short covering sends prices up in a straight line until overhead supply is reached. This is what Dr. Stool calls a "crash-up." The current "crash-up" looks to have a little further to go. The 5-6 week cycle has a very preliminary projection to 2000-2040, which will, of course require the media to proclaim a new bull market, since the rise will be more than 20% from the closing low. The four week cycle also has a preliminary projection of 2000. The 13 day cycle projects to 1980. The 8 day cycle projects to 1925. So its too early to go short again. Wait for the analysts to start saying "bull market." You'll know what kind of "bull" that is, won't you? Onward and Upward (4/9/01) Dr. Stool believes the Nasty, like the Dow, is in a 10-11 week cycle up- phase, and that it may have also reached a cycle low for the 4-5 month cycle. Regular readers know, however, that this does not mean that prices will rise in reality, only that they will stop dropping like a stone for a few weeks, or a few months if, in fact, the 4-5 month cycle has bottomed. There are two possible paths for the 21 week cycle. One points to a low of 1250, which would be due soon. The other points to 1650, a level already reached. The behavior of the indicators on the daily chat show a very minor improvement in momentum, and some "bottominess" on a couple indicators. This suggests that the downside potential probably has been exhausted for awhile, and that scenario two is probable. In this kind of atmosphere, you'll have more Amazon Killer Spikes, such as the one we saw Monday. These are gap openings which result in cardiac arrest and immediate death, if you went short the night before. Look, if you went short at 140, this is no big deal, but when you short 'em at 8 after they've been dropping like a stone for a year, this happens. What is "this." Rearrange the letters. So for heaven's sake, please check the NASD short interest tables before taking a position. Be aware of the danger that lurks when there are too many of your fellow bears in one den. Also after the long period of decline, it's probably not a good idea to stay short overnight. Finally, short 'em at the top, not the bottom. (OK, not funny.) As for the upside, at this point, none of the cycles projects to higher than 1800. Marketwide fireworks are unlikely in the weeks ahead, but beware of those killer spikes. Other than that, things are going to get mighty dull for awhile. Refusing To Follow The Script (4/6/01)The bears regrouped with a vicious counterattack Friday, lopping off 1/3 of Thursday's gain at the opening and driving back repeated upward forays. Bear markets take no prisoners, and that includes the shorts, who had it handed to them Thursday, probably doing a lot of covering of positions Thursday afternoon, only to see a big gap down on Friday's open. If that happened to you, you have plenty of company. This market has been very ornery. It refuses to be outguessed. Keeping things in perspective, the 21 week cycle low projection has only risen to 1450, which is still a big drop from here. The peak is now in place for the 5 and 8 day cycles. But downside projections have been met for the 4 week through 4-5 month cycles. That means that the 1600-1625 area could be a temporary low, as positive short and intermediate term cyclical forces would normally counterbalance the hard downslope of longer term cycles for a couple weeks. Let's emphasize "normally". This is a once in 72 year supercycle event we're in here. There's always the chance that the rush of the secular trend collapse will overwhelm any upside forces, as they did Friday. One look at the chart below will tell you that Thursday's rally did no damage whatsoever to the downtrend. It is absolutely intact. Be that as it may, the cyclical forecast calls for a very weak up phase, that will probably manifest as a trading range with a temporary floor at 1600, and rallies not going beyond Thursday's high of 1785. 3,2,1, aand Lift-off (4/5/01)Well, well, here's that "brief rally." Will it be a one day flame out? Probably not. Downside objectives were met for the shortest cycles, and it appears that 1620 was probably the 10-11 week low as well. So Dr. Stool is not going to jump back in and short this thing right away. It's much too early for any upside projections for all but the 5 day cycle. On a very preliminary basis, it appears headed for 1850-1900. If it can hang there for more than half a day, it would confirm that longer waves have turned up, and that the Nasty will plow higher. There's a downtrend line at 1820. It wouldn't be surprising to see that gapped on the opening. There's absolutely nothing unusual, or even significant, about this rally. It's s.o.p. for great bear markets to have 5-10% rallies every two months or so. Given the Nasty's usual volatility, we might see double that here. What'll really be funny is that the Nas could get to 1970 in another two days, which would be up 20% from the closing low. Caint Nobody Buy Channel will then proclaim a new bull market, at which point it will end. We will have had the shortest bull market in history, three days. You can almost smell this coming. ANOTHER Breakdown (4/4/01)The Nasty broke down through another descending trendline Wednesday, this time one marking the lower channel boundary connecting the August and December 2000 lows. That means that the downtrend has, once again, accelerated. The next downtrend channel line, stretching back to last October, extends down through the 1500 level and is dropping 12% per month. That 21 week cycle low projection of 1300, due in May, (see below), looks just a tad aggressive. Looks more like 1400. That projection will be refined several times as things progress. Since the five and 13 day cycles were pointed toward a low of 1600-1625, and the Naz got there Wednesday, it's time to get a little cautious here, fellow bears. Dr. Stool is well aware that Bill, King of Bears, and Crash Lewis are looking for a crash. They could be right, and it sure would be a shame to cover your shorts before it happens. But Dr. Stool adheres to the theory that this market will continue down in a more or less orderly fashion, with a 5-10% rally every two or three months. That was the pattern of the Dow between 1930 and 1932, and it seems to be what the cycle work is suggesting. Is that a contradiction with the breakdown below the trendline? Uhhh, yes. But Dr. Stool suspects that the Nasty will attempt a recovery above that line. If it does so successfully, the rally could be a Nasty for bears. So just be nimble out there. Best guess? One brief rally before a real big swoon to 1400. Let's call it a swoon, instead of a crash. Elevator (4/3/01)Dr. Stool feels like one of those old time elevator operators. "Going down. Next stop 1600. Local car stopping at all floors." The 4-5 month cycle projection is now 1300. Measuring from the December bottom, the most likely timeframe for a low on that cycle is May. In the short run, the 5 through 13 day cycles project to 1600-1620. That low is due next week. The good news is that Dr. Stool does not expect the Nasty to reach zero, this year. About centered moving average projections. Seepage Continues (4/2/01)The steady drip, drip, drip, continues. It ain't pretty, but quite effective for the shorts. If you are beginning to get the feeling that this market will never come back to life, you're not too far off. There's little to add since the last column (below). Projections for lows on short term cycles of 5 to 13 days are firming up between 1700 and 1725. The four week cycle has topped out. There's no downside projection on that one yet. Dr. Stool presumes it will coincide with the 4-5 month cycle projection of 1600. There is no sign of any improvement on the daily chart indicators below. The Nadsdaq is acting pretty much like the Dow did between 1930 and 1932. (Acrobat Reader required.) No crashes, just steady degradation, day after day, with a bump every six to eight weeks.
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