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?

Intraday Updates 1/16/03 (Chart below)

12:30 5 hour- 1 day cycles should begin to emerge from trough over next hour. The 5 hour cycle high is due around 3-3:30. 1 day cycle high due at close-10 AM tomorrow. No reason to expect anything other than bouncing between limits of narrow range. 8 day cycle cmap is still around 911 but 3 and 5 day cycles are in a swup. Follow Stooltrading Beta with regular chart updates, and comments every half hour.

9:00 AM Fucutures bumped up on the cpi and jobless claims. Ho hum. Will they never learn. As Doc noted last night, yesterday's weak up phase in the PM might hang on for a few minutes in the AM. He expects the high shortly after the open. Based on the fucutures the cmap is 922, then down into mid-day. But they're selling off going into the pre-market close, so it may not even get that high. Looking for 26.83 on the QQQ, then down to 26.30 around mid-day.

Intraday Wednesday - The 1 day cycle high cmaps were ticked at the open. If you blinked you missed it. The down phase persisted until the expected 5 hour cycle low at 1:30, reaching cmaps that Doc was able to project about halfway through the morning move. They based for about an hour, then started higher. 3 day cycle low cmaps were reached, but 5 and 8 day cycle cmaps are still a few points below the mid day low. The PM up phase was weak and was out of gas by the close. It may hang on for a few minutes at the open, or it may not. A down phase should follow Turdsday morning, lasting into the noon hour, and perhaps as late as 1:30 PM. The 5 day cycle cmaps of roughly 912 should be hit at the mid day low. 8 day cycle cmap looks like 908. If the rest of the world is weak overnight, and futures are weak in the morning, those cmaps could adjust down.

Pre Market Update at 9:15 AM. Follow Doc's intraday commentary and cycle charts on the hour and half hour during the trading day at the Stooltrading Beta Test.

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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 shown 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. Times and prices are the projected cycle highs and lows with cmaps.

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

Wednesday's Markets

MoGauge Day - 1/15/03

Wednesday is always one of our favorites because it's MoGauge Day, when the MoGauge Bankers Ass. releases its MoGauge applications data for the past week. Why is that important? Because mortgage applications get funded about 4-8 weeks later. When the GSE's hold those loans in their portfolios, they then turn into money through the magic of money market fund intermediation. Broad money supply grows, and that flows into the markets and economic activity. Likewise, when mortgage activity declines, money growth slows or even goes negative, as it did last week. In effect, the MoGauge has the potential of telling us to what degree money will be added to the system in a month or so. Big jumps in the MoGauge tend to be followed by big stock market rallies along with big jumps in money supply. When these bulges subside, the market follows a month or two later. Stay tuned for all the pretty money supply pictures here following the Fed's Turdsday releases.

The current chart shows that after a huge boom through the summer the mortgage bubble started to deflate. Al then cut one, and has kept the bubble on life support with constant bursts of money gas since then. The bond market is the wild card. Those guys are watching all the money creation with a wary eye toward inflation. Without the cooperation of Bill Gross and company as well as foreign holders of Treasuries, the bubble is dead.

78% of all new mortgages are refis. Think about it. A minor uptick in bond yields will be enough to cause the refi bubble, which is the fountainhead of all financial activity, to collapse. As it deflates, the repercussions will be felt throughout the monetary system. Purchase applications could break down as well. That would bring virtually all economic activity in the US to a screeching halt.

Meanwhile, the market might have put in an important top today. Doc is focused on short term indicators, as there's reason to believe that the 10-13 week cycle indicators will be late in signaling the turn. Those short term indicators have started to turn, and short term cmaps have been met in most cases, although there are still a few slightly higher ones hanging out there. The 10-13 week cycle also now has a preliminary cmap indication, and it is only a handful of points above the recent high on the SPX.

However, even if this is the top, it will take some time, perhaps weeks, to play out. It is still early in the 10-13 week cycle, and those who are keyed to that time frame will continue to buy the dips for at least a couple of weeks. It's going to be a volatile and bumpy road. There should be opportunities to get short on rallies before cycles line up for a big decline later in the first quarter.

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 $5.75 billion in overnight repos. That was a net add as there were no expirations. These will expire Turdsday, along with $9 billion in 28 day repos. That means they will have to add $14.75 billion to stay even. In the last couple rounds of 28 day repo refunding they've done $3-5 billion. It will be interesting to see of they refund this in full. The weak PPI on the heels of the lousy retail sales Tuesday, will probably spook Al again. It would not be surprising to see them try to at least stay even by replacing all of the expiring repos and a little extra for good measure. If they don't, the market will tank.

The 4 week moving average of total Feed has turned flat. Al will probably try to keep it there, if not ramp it again. Heavy feeding could keep the market from falling apart for awhile, but can't push it higher. Sellers are waiting.

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.

The Feedometer is back within the short term uptrend channel, but the Slowmo Feedo is downticking. Less Feeding would be bearish, and they will have to pump a whole lot more to even keep the market flat.

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 (Slowmo Feedometer). A break above the orange trendline might indicate a more aggressive jamming policy.

Bond yields were down slightly. Cycle juxtaposition is likely to keep yields locked in a range of 4.0 to 4.30 for the foreseeable future. There are still a couple of days remaining in an 8-13 day cycle down phase with a cmap of 4.0, but unmet upside cmaps of 4.24 to 4.33 for the up phases of the 4 week through 13 week cycles.

Bond Yields-Long Term View

Fed Turdsday Monetary Review

Dow Inflatables- A couple days to go in the 13 day cycle down phase and the cmap is 8610. There are still unmet upside cmaps of 8900 on the 4 and 6-7 week cycles, but let's not quibble. The 4-7 week cycle oscillator looks toppy.

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

Short cycle oscillators rolled over. The 6-7 week cycle oscillator also appears to have turned (chart below) The 8-13 day cycle sideways down phase showed signs of becoming a down down phase. (Why does this software keep telling me I have a repeated word error?) The low is due within 3 days. The cmap is around 912, so far. That could change. We want to focus on the shorter term signals. Look to the 17 day rate of change for confirmation.

10-13 Week Cycle

10-13 week cycle signals are likely to be late if the up phase craps out early, as expected. The cycle oscillators continue to move weakly higher and they will do so well beyond the price high. But the fact that the 29 day ROC can't get off the dime in this up phase is a sign of impending weakness.

It's finally possible to make an initial preliminary cmap for this cycle. Ta da! It's 935. If the market stays flat or weak for the next few days as Doc expects, the up phase is over in terms of price, although perhaps not in time. It's possible that the trading range may continue for 4-5 weeks, although it should have a downward bias.

Sentiment

VIX was up. (Chart scale is inverted to show relationship with prices.) The indicator is extended at the top of a 6 month channel that has marked previous intermediate highs and lows. Normally after 3 days of extension, the market begins to roll over. It did. A move to 30 or more will confirm the reversal.

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.

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 1/15/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	??
6 Month	SWD/0-4W	??
10-13 Week	SWU/0-29	935 Done
4-7 Week*	Top/0-3	935
8,13 Day	SWD/0-3	912

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 1/15/03

Cycle	Phase/PTT	Target
10-12 Month	Top/0	1490 Done
6 Month	SWD/0-4W	??
10-13 Week	SWU/0-19	??
4-7 Week*	Top/0-3	1465
8,13 Day	SWD/0-3	1410-1430

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.

Golden Stool Comments 1/15/03

Gold and HUI treaded water Wednesday as the sideways down phase continued in all cycles up to 10-13 weeks. The HUI 4 week cycle has a downside cmap of 139. It's already been hit. The 13 day cycle cmap is 135. The low is due within 3 days. The 13 week cycle sideways down phase should end by the end of the month. The only downside cmap for the gold price is 348-350 on the 13 day cycle. Doc still expects the correction should to be short lived, and shallow.

Charts as of 1/15/03 Close

Uncle Buck's Illness Comments1/16/03 7:30 AM. Updated in AM edition

After a day of wild volatility Uncle B stabilized around 101.25 overnight. The 10-13 week cycle cmap has dropped to 98-99. Short cycle lows are due within days. Although a 6 month cycle sideways up phase is due, the 1 year cycle is heading lower. Doc expects to see the mid 90's by the third quarter. Chart as of 1/15/03

The 1 year cycle cmap is 94.50 due late in the second or early in the third quarter.

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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.

About centered moving average projections.

ABBREVIATIONS:

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