The Anals of Stock Proctology

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Doc does not make trading recommendations. This update reports time cycle estimates and centered moving average projections based on the Hurst cycle analysis method. This publication is for entertainment and educational purposes only. Doc assumes no responsibility for the accuracy or inaccuracy of the estimates and projections presented. The market may or may not meet the projections. Stoolies should thoroughly familiarize themselves with the methodology before trading based on this method. Those who do not have the time or inclination to develop a trading strategy based on testing and research should not trade. Trade at your own risk. Yadda yadda. How's your motha?

PM Update 1/8/03 1:00 PM

The SPX hit the downside cmaps posted last night. Now what? The 3 day cycle cmap is now 908. Assuming it gets there it will pull the 8 day cmap down to 900. The 5 hour and 1 day cycles appear to have made an early high around 11:30. The next 5 hour cycle low is due at 3:30 +/-. The cmap looks like 906, but could still change depending in particular on the next half hour-45 minutes.

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The cycle map below is an estimate of how the market might behave over the next few hours. Should the pattern be broken, the map should be redrawn to fit the actual. Cmaps and times are guidelines only. Cycles vary in wavelength and amplitude. Directional changes within an hour of the expected turn and a few points of the cmap should be respected. The indicators rule.

5-8 Day Cycle______ 2-3 Day Cycle_______ 5 Hr-1 Day Cycle

Pre-Market Update 1/8/03 9:25 AM

Sorry for the late update. technical difficulties this AM. Weakness in the fucutures spy's and q's confirms Doc's pre-market outlook posted last night.

Tuesday's Markets

Intraday - The market started out down, selling into a 1 day and 5 hour cycle low around 10:30 AM. Is normal cyclicality returning? The 1 day cycle high came at 2 PM. A 5 hour low was due in the last hour. The minor uptick in the last few minutes may have been it. There could be a little follow through in the early going, but based on the low at 10:30 Tuesday, Doc is expecting a 1 day cycle low around the same time Wednesday. The cmap is 914.

The 3, 5 and 8 day cycles are in down phases. The downslope is likely to be shallow, as bigger daily cycles are still headed up. It's too early for reliable downside cmaps. The 2 day nominal cycle has a cmap of 911, however. Stay tuned for the Pre Market Update around 9:15 AM NY time.

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5-8 Day Cycle______ 2-3 Day Cycle_______ 5 Hr-1 Day Cycle

Immunity Challenge 1/7/03

Yesterday Doc talked about the fix being in. But he said that if the rest of the world doesn't buy in to the Wall Street-Washington carnival any more, then the game is over. Let's just say after today's action, that they were hesitant. There are still signs that the rally could retest or nominally break the December highs, but the next 2-4 days are critical. If they can't get it up they probably aren't going to. The mental institutions have shot their load. The Feed is now taking a wait and see. That leaves The ROW. (Rest of World). Let's keep our eye on Uncle Buck overnight the next few nights to see if there's enough interest to keep this show going.

Doesn't look too promising for the bulls at the moment.

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Then the jackasses on Crapvision saw Shrub's big package they acted like a bunch of 16 year old girls. The First Lady should have kept it to herself, it caused such a stir. Larry Kurlymoe immediately proclaimed a 40% gain in the market. Jimmy Jones Creamer was wetting himself and spraying spittle all over the camera lens.

But none of that matters. What matters is liquidity. This month's rally was the result of the liquidity overwash from the October refi boom. That is now drying up and the Feed may not want to risk continuing its maniacal pumping for fear of igniting a meltdown in the bond market. What are we left to do? Read the charts and let them tell us. So far Doc thinks they are saying the market may be in the mood to go up, but the firepower may not be there. Doc thinks this tug of war we've witnessed for months will continue, and that nothing dramatic will happen in either direction until mid February when it should start to weaken more.

In the interest allowing you to download your Anals a little earlier in the evening, Doc has made some changes to eliminate some of the redundancies which take time but add little to content. Primarily this involves presenting the Nasgap charts and data sans the commentary which adds little because it is usually a reflection of the comments in the SPX section.

Be a Johnny Applestool! Help spread the Stool! Feel free to repost snippets from the Anals on message boards around the web. Just give a link back! Many tanks - Doc

The Feed stood pat on a day where there were also no expirations. This followed an astounding $14 billion drain Friday and a $3.5 billion add on Monday. This still looks like the beginning of the kind of vacuum clean-up operation that has triggered market declines in the past because the Gang of 22 is forced into liquidation mode. No expirations Wednesday.

Two trends are evident on the Feed Index, which is the total Fed holdings of loans and securities. One is the 10% growth trend beginning in May of 2001. The blue channel going back to last December suggests an 8% growth rate. Look at the 4 week moving average (brown line) and compare it with the slope of the tow larger channels for an indication for whether the slope of short term growth is slower or faster than the 2 longer term trends.

Both the Feedometer's 6 month downtrend channel, and the recent uptrend is still intact. All the pumping over the last six weeks has only managed to keep the market flat. Hasn't helped the bond market either.

The Feedometer theoretically measures excess Feed available for bond or stock market jamming. Al selects a trend level he feels is needed to reflatulate the economy. The Feedometer measures the difference between the apparent trend target, and actual day to day Feeding (Fastow Feedometer), as well as a four week moving average (Snowmo Feedometer). A break above the orange trendline might indicate a more aggressive jamming policy.

Fed Turdsday Monetary Review

Bond yields fell. The Gang of 22 is still shorting heavily. Historically when they do this, the bond prices have fallen, and yields rose. Short cycles are heading up and the 10-13 week cycle has turned up hesitantly. The upside cmap on the 4-5 week cycle remained at 4.15-4.20.

Bond Yield Long Term View

Dow Inflatables-

The Dow still has an upside cmap of 8900 for the 8-13 day cycles. Keep in mind that cmaps are always nothing more than edumacated guesstimates. The oscillators say the Dow will make it. Doc as always, has his doubts.

All of Doc's daily cycle charts are powered by METASTOCK. (Sorry about the bull.) Available at Doc's bookstore! Metastock is the industry pioneer in charting software. Doc has used it for over 20 years. If you have questions about purchasing Metastock from Doc's store, you can email Doc.

Portfolio Sphincters Index (SPX) and Sentiment

Cycle Chart
The red channel is the idealized 18 month-2 year cycle. Dark blue is the 10-12, or 6 month cycle. Teal is the 10-13 week cycle.

Short Term Cycles

The 8-13 day cycle high is due now. The cmap of 925-935 has been hit. The 4 and 6-7 week cycles cmaps range from 935 to 965. These cycles should peak from 2 to 10 days from now. The short cycle oscillator is approaching a top zone.

10-13 Week Cycle

The cycle oscillators are moving up but the upturn on the 29 day rate of change remains stalled. It's still too early for upside cmaps. That may take another week. A relatively flat week ahead would signal a flat up phase, which would be consistent with the 6 month cycle heading down, and the 10-12 month cycle topping out. It's still an "if-then" thing. The up phase could last into mid February or end as soon as next week.

VIX

VIX was up slightly. (Chart scale is inverted to show relationship with prices.) The indicator is at the top of a 6 month channel that has marked previous intermediate highs and lows. However, it may be on a trend path toward the low 20s. It's really no help here.

The 15 day rate of change is a proxy for the 4-7 week cycle. The 29 day rate of change is a proxy for the 10-13 week cycle. The dark blue overlaid line is the 10-13 week cycle oscillator, while the red line is the 6-7 week cycle oscillator. The VIX is a measure of implied options volatility reflecting relative fear or complacency. It is plotted below on an inverse scale to better show the relationship to the price chart. The "Stool Bands" may reflect either 6 month or 10-12 month cycles.

The Dickarms never reached an extreme on the last 10-13 week cycle down phase that would support a big move to the upside.

Long Term View

The Cycle Conditions tables include cycle phase and a wild guess as to number of periods to the next turn, in days for the shortest cycles, weeks (W) or months (M) for the longer ones. This is a fluid exercise, in other words, the projections are likely to be wrong, but they force us to be vigilant for key turning points, and frequently work well enough to prevent costly misreadings.

SPX Cycle Conditions as of 1/7/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	??
6 Month	SWD/0-6W	??
10-13 Week	Up/3-28	Too early
6-7 Week*	Up/2-10	935-965
8,13 Day	Top/0-1	925-935

PTT - Periods Till Turn
L-Low, H-High
SWD= Sideways Down Phase- Trading Range
SWU=Sideways Up
p: preliminary
Too Early: Too soon to project
No Factor: Low amplitude is dominated by larger cycles
* The 4 and 6-7 week cycles are distinct but usually overlap. The dominant cycle is reported.

Nasgap Charts

The Nas is expected to behave more like the SPX with the continued de-weighting of tech. In the interest of publishing the Anals earlier in the evening Doc is presenting the charts and data without commentary, as it is largely redundant relative to the SPX commentary above.

Cycle Chart
The stoolicator is a proxy for the dominant trading cycle, either 6-7 or 10-13 weeks. The 17 day rate of change is a proxy for the 6-7 week cycle. The 29 day rate of change is a proxy for the 10-13 week cycle. The teal channel is the idealized 2 year cycle. The light green channel is the idealized 10-12 month cycle. The dark blue channel is the idealized 5-6 month cycle. The red channel is the 10-13 week cycle.

Long Term View

Nasdaq Cycle Conditions as of 1/7/03

Cycle	Phase/PTT	Target
10-12 Month	Top/0	1490 Done
6 Month	SWD/0-6W	??
10-13 Week	Up/3-28	Too early
4-7 Week*	Up/0-8	1445-1465
8,13 Day	Top/0-1	1435

PTT - Periods Till Turn
L-Low, H-High
SWD= Sideways Down Phase- Trading Range
SWUP=Sideways Up
p: preliminary
Too Early: Too soon to project
No Factor: Low amplitude, dominated by larger cycles
* The 4 and 6-7 week cycles appear to have merged into one.

Long Bong Hit - See top of page.

AM Edition Features (Previous) These features are in morning edition, published between 7:30-8 AM ET US, or the Weak End Edition.

Golden Stool - Yesterday we began to see the effects of the down phase which has been under way for a few weeks. Doc still expects it to be shallow. The 13 day cycle cmap is 342 on pog and 139 on HUI both on a closing basis, but intraday probes could be lower. The upside amps on the 13 week cycle have come down to 353 and 151 respectively. Those have been met. Now it's a matter of waiting out the correction. The earliest the correction should end would be the last week of January. It could last or at least base for a few weeks after that.

Long Term View

Uncle Buck's Illness

Long Term View

Suctor Watch and Stoolwethers- Now posted on separate page. Updated each morning between 8 AM and 9:00 AM NY time.

See you in Intraday Stool.

Dr. Stepan N. Stool
Chairman of the Department of Stock Proctology
A.S.S. Endowed Chair
American Society of Shortsellers Endowment
American Academy of Stock Proctology

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Explanation of Intraday Commentary-Build charts at http://www.livecharts.com. For custom time bars insert a comma after symbol and number of minutes, e.g. compx,90. This will give you a bar chart of the Nas with 90 minutes per bar. The one day cycle is usually most clear with 8 minute bars and 26/18 stochastics. It varies from day to day. Sometimes 6 minutes works best. Experiment to find the best fit for your trading style, and the market's dominant frequency at the time.

The goal here is primarily to monitor the condition of the 8 and 13 day cycles. I typically use 90 minute bars with 26/18 stochastics for the 13 day cycle proxy on the indices during regular trading hours. Other cycles use 26/18 stochastics with the following:

8 days- 60 minute bars
5 days- 40 minute bars
3 days- 24 minute bars
2 days- 16 minute bars
1 day- 6, 7, or 8 minute bars

On the 24 hour futures charts, use a time per bar approximately 3 to 4 times the above number of minutes, to represent the cycles listed above.

ABBREVIATIONS:

cma: centered moving average
cmap: centered moving average projection
os or ozzie: oscillator
sto: stochastic
swup: sideways up phase
swdp: sideways down phase