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 1/9/03 1:00 PM

The 5 hour cycle down phase continues. Looking for the cycle low around 2 PM and a 1 day cycle low in the last hour. The 3 day cmap of 931 will come down if the current softness persists. The tentative downside cmap on the 5 hour cycle is 920.

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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 1/9/03 1:00 PM

We have a little jam in the fucutures just before the open on the November unemployment claims. Another case of over reaction to ancient history. So what else is new. So far the move is within the parameters of the expectations Doc had last night. The preliminary upside cmap for the up phase is 916.

Doc will be testing Stooltrading again today. Updates will be posted on the hour and half hour, and as needed, with alerts on IDS. Stooltrading will have an intraday focus. If all goes well over the next few weeks Stooltrading will be available by a variety of subscription plans from weekly to annual. Please send your feedback to Doc via private messenger on the Stool Pigeons Wire, or by email.

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Wednesday's Markets

Intraday - The market fell hard on the open into a 1 day low around 10 AM. The up phase was weak and died early just before noon. They spent the remainder of the day drifting lower, with no bounce off what should have been a 5 hour cycle low at 3 PM. 3 and 5 day cycle lows were due. If htye happened we don't know it yet. Could have been it at the end of the day. However, the cmaps look like 902-904. Those numbers could be hit in the AM and generate a bounce. Could also see an 8 day cycle low Turdsday, with the cmap currently looking like 898. Somewhere between 898-904 looks like shport and a good place to cover short scalps. As for going dong, against Doc's religion. he sits out the rallies. (Or tries to short them too soon, and gets squished.)

The 1 day cycle low may have been in at the close. If not, it will be early tomorrow. The cmap on that is 908 which was ticked near the close. Expecting at least a small bounce through late AM. Update at 9:15 AM NY time.

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The cycle map below is en 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

Uncle Buck's Butt Crack 1/8/03

Wednesday is of course, MoGauge day. The Mortgage Bonkers Ass. released it's weekly Mortgage Applications Index, and it it left a big stink. Was it a seasonal adjustment thing? Won't know till next week. But if this holds, it will show up as a spike in broader money measures in 4-6 weeks.

As usual, most of the jump was in refi's. Purchases were up, but remain in a six month downtrend. Next week will be key. If this continue higher still, yet another round of reflatulation is under way that will give the market a temporary boost in March. But let's withhold judgment until next week when the numbers will not be impacted by the holiday seasonal adjustment.

Perhaps more important is the behavior of Uncle Buck today. What was that?

Over the last few days Doc has been thinking about the relationship between the Feed, via the Gang of 22, the mental institutions, and furriners. These are the three legs to the market stool, also known as the "capital stool." Doc thinks, one leg, the mental institutions are tapped out. They have minimal cash reserves, and their buying alone is not sufficient to prop up the market in the face of steady, if not increasing new supply, in the form of both bonds and stocks, including stock supply via option exercise and pubic offerings. Whatever inflows they get, they use to buy. The capital stool's second leg is the Gang of 22 (Fed primary henchmen), who take the Feed, multiply it by a factor of what? 8? 9? Whatever. They have a lot of leverage. Anyway, they multiply the Feed, and they use it to trade stocks and bonds. When stocks are good, in other words, when there's lots of suckers, they buy stocks. Now when there's not so many willing suckers, the Gang doesn't want to buy stocks so much. No one to offload to. So they buy bonds. And if the bonds aren't so good, they plow the Feed right back into short term Treasury paper, which does no one any good, and results in what is known in the vernukuler as the Feed pushing on a string.

This is what they have been doing lately. In fact, they have even been shorting bonds, as evidenced by their recent gargantuan borrowings of bonds and notes from the Feed.

That leaves the ROW. The ROW has had their their little fingers burnt more than a few times and more than a little bit in the last three years. As a matter of fact, they have been the Street's primary bagholders. If they decide they don't like the rules of this Wall Street - Washington carny game any more, they will take their marbles and go home. The way we know where their marbles are is too watch Uncle Buck. As long as he is acting like the sick worthless lazy old dog that he is, it doesn't matter how much Al feeds. There is no way the market can go up without the suckers buying US stocks and bonds with US dollars. Uncle Buck's dropping drawers, and exposed butt crack tells us all we need to know.

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 added $6.25 billion in overnight repos. There were no expirations. In addition to the expiring overnight repos, $3.5 billion in 3 day repos and $7 billion in 28 day repos will expire on Fed Turdsday. According to my trusty HP, that's $16.75 billion to replaced. After today's atrocious market performance, Doc doesn't doubt that they'll do it. The market is the ornery tail that wags the Feed dog.

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 size of the Feed on Turdsday and the market's reaction will tell us whether the Feed has the desire to try to jam it, and whether the players will cooperate. Doc thinks the market is Fed up, and just won't take any more.

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 were down a bit. It is still early in an apparent 13 week cycle up phase. With the 6 and 12 month cycles opposing one another, the 13 week cycle should have a mild upward bias, but this market could remain range bound for months.

Bond Yield Long Term View

Dow Inflatables-

Well, well, well. Both the 13 day and 4 week cycle (not shown) cmaps appear to have dropped to 8800. Is that just Doc's bias? If the Dow does no better over the next two days, the sell signal on the 13 day ozzie will be confirmed, with 4-5 days to go. A deep pullback would either abort the up phase in the 10-13 week cycle or ensure that its slope is no better than flat.

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 in. The preliminary downside cmap is 898 on the 8 day and 875 or so on the 13 day, the low of which isn't due until next week. The 4 and 6-7 week cycles cmaps have dropped to 935- 945. These cycles should peak from 1 to 9 days from now. The short cycle oscillator is near a top zone, and could flash a sell signal in a day or two.

10-13 Week Cycle

The cycle oscillators are moving up but the upturn on the 29 day rate of change remains stalled. It's possible that the up phase began in mid-December and that the recent pop was the blowoff. We'll see. It's still too early for upside cmaps. 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. (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. So it's 50-50 that this was the top. Big help.

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 29 Day 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 1/8/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	??
6 Month	SWD/0-4W	??
10-13 Week	SWU/3-27	??
6-7 Week*	SWU/1-9	935-945 Done
8,13 Day	Down/1-6	875-898p

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 1/8/03

Cycle	Phase/PTT	Target
10-12 Month	Top/0	1490 Done
6 Month	SWD/0-6W	??
10-13 Week	SWU/2-27	??
4-7 Week*	SWU/0-8	1415-1445
8,13 Day	Down/1-6	1370-1390p

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 - Pog and Cousin HUI staged a recovery yesterday.

When a chart is trending up strongly, the down phase of shorter cycles will be very shallow, sometimes to the extent of just a barely noticeable slowing in the larger advance. The only sign that the issue is in a down phase is the declining oscillator. Price however, either goes sideways, or continues to advance at a slower rate while the oscillator corrects. This is what Doc calls a sideways down phase or swdp. Swdp's usually have very bullish implications, the exception being when the larger cycle governing the overall movement is reaching a top phase. In that case the ensuing shorter cycle up phase will be brief. Based on the 12 month cycle being early in its up phase, Doc isn't worried about that. At the moment, the cmaps project very little, if any downside in the current 6-7 week and 13 week cycle down phases which are due to end next week. Doc is just going to hold on through the gyrations in the expectation of pog near 400 and HUI near 200 later this year. If anything changes, Doc will let you know right here.

Long Term View

Uncle Buck's Illness Comments in the AM Edition

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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