Intraday Turdsday -  The ponies got a strong start out of the gate and ran hard in the first furlong. The trigger was an idiotic reaction to the CPI and unemployment claims, all of which is phony, meaningless data. The rally fizzled at 10 AM, putting in the 1 day cycle high. A 5 hour-1 day cycle low was due between 12:00 and 1:30. They barely paused there, and continued to drift lower in spite of what should have been a 1 day cycle up phase in the PM. The low finally came around 3:30. The up phase was cut short by the Mr. Bill spinning circus in the after hours. After initial weakness, look for a recovery attempt as the 1 day cycle high completes around 10 AM, then softens again through mid-day. 

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

Turdsday's Markets 

Fed Releases Turdsday - 1/16/03 

Here's what the longest running tout rag, the Whack Street Journal, had to say about Turdsday's miserable market. "In a surprise that could lift stocks on Friday, Microsoft announced after the close that it would start paying an annual dividend of 16 cents a share and declared a stock split." Then they quoted a small time market strat-ego-ist: 

"What's more significant than the events is the market's reaction to the events. What's been fascinating to watch is how resilient this market has been in the face of some negative news," said Barry Ritholtz, chief market strategist at Maxim Group in Woodbury, N.Y.

The market's stay-put performance -- even in the face of bad news like that coming out of Iraq on Thursday -- speaks volumes about Wall Street sentiment, he suggested.

"Instead of downside momentum gaining speed, it peters out. Buyers are using dips to pick up stocks," Mr. Ritholtz said. "That doesn't mean we're not a little overbought on the short-term, which is why these big one-day gains aren't sticking, but this market feels like it's a tightly loaded spring and wants to go higher."

The article then went on to crow about IBM indicating that stability in information technology spending is a good sign, about IBM's pile of cash, and the possibility they would increase their dividend. It talked also about the good news on inflation and unemployment claims. 

This isn't reporting. It's industry spin. Plain and simple. Thank God for the internet and independent websites like this one, where it's possible to get to the truth. Meanwhile Mr. Bill upset the apple cart a little later in the evening. So we'll see what Mistress Market has to say about all this good news Turdsday, now won't we? 

Fed Turdsday Monetary Review

Let's start with the fountainhead from which flows all credit bubble economic activity, the MoGauge, from yesterday's Anals. 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.
 

With the MoGauge beginning to falter in October, broader money measures began to shrink in December. That shrinkage began to accelerate in the latest reporting week, ended January 6. This, in spite of panicked, maniacal pumping by the Feed during November and December. Once the mortgage engine downshifts, Al and the boys are powerless to do anything about it. The Feed has shriveled so much in relation to the size of credit bubble driven M2, M3 and MZM, that Al just can't get it up any more. You are witnessing the opening of a real life financial disaster movie. 

Even in the tiny corner of the money supply where the Feed should have the greatest influence, Al's impotence is obvious. M1, which has been nearly flat for more than a year, also fell. Growth in checking accounts has been zero during the greatest sustained debasement of currency the US has ever seen. These data cannot be separated from the fact that the stock market can't get off its ass and is about to get much worse. They are simply two sides of the same coin, reflections of a system that  is destroying money almost as fast is it is created. The system has a leak in the basement of the 700 story derivatives tower, and it is about to become a deluge as the credit sewage treatment plant spews  untreated sewage into the system. 
  

Look at the size of the drop in the value of bank loans and leases. The tidal wave of bankruptcies is beginning to take its toll. They can't keep hiding these festering off balance sheet boils indefinitely. Sooner or later, the boils erupt. When the boils pop, the banking system squeezes some more. The next step is a credit crunch.
 

That's all the good Fed Turdsday news for this week, stoolies. Drop yourself in, next week, when once again,  your stock proctologist reveals the stinking truth on the Fed's releases Turdsday.

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 $4 Billion in 28 day repos and $6 billion in overnight repos to refund $5.75 billion in overnight repos and $9 billion in 28 day repos, resulting in a net drain of $4.75 billion. 

The last couple rounds of 28 day repo refunding have been $3-5 billion. They stayed in that range today, but let $5 billion of the $9 billion of the expiring 28 day repos go away. They must be warily watching the dollar and the bond market. Al knows damn well, the more he debases the currency, the worse the dollar will perform, as foreign capital flees. The next step is financial collapse as a depreciating dollar and capital flight become a vicious cycle. 

The 4 week moving average of total Feed is flat and the Feed Index is below that line. Al's between a rock and a hard place and may have to tighten slightly to try and slow the movement of capital out of US markets. This is the Grand Catch 22, because without massive Feeding, the stock market will collapse. With it, the dollar and the bonds collapse. 

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 fell below the short term uptrend channel, and the Slowmo Feedo is downticking. If they don't get the Feedometer up, stocks will go limp. 

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. The current short cycle down phase has a cmap of 4.0. If that 6 month cycle begins to turn up, disaster time is here. 

Bond Yields-Long Term View

Dow Inflatables-  Two to go in the 13 day cycle down phase and the cmap is now 8550. The upside cmaps for the 4-7 week cycles dropped to 8850. Done. The 4-7 week cycle oscillator has turned down, signaling a down phase in that cycle, and the end of the bear market rally. The down phase in this cycle should last two to three weeks. The big but is the 10-13 week cycle. It's beginning a top phase. It could be short or it could last up to 6 weeks, with a series of short sharp declines and rallies. Follow the indicators!

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 broke sharply. The 6-7 week cycle oscillator is also turning. (chart below) The 8-13 day cycle down phase has perhaps 2 days to go with the cmap now dropping to around 900. That could still change. Stay focused on the shorter term signals. Look to the 17 day rate of change for confirmation. 

10-13 Week Cycle

10-13 week cycle signals will be late if the down phase starts early. That's why we want to key on shorter term indicators now. The 10-13 week cycle oscillators continue to move weakly higher and they will do so well beyond the price high. A breakdown in the 29 day rate of change from a flat in the neutral zone would signal a severe decline.

The initial upside cmap for this cycle has been met at 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. A choppy trading range with a downward bias may continue for 4-6 weeks. 

Sentiment

VIX was down slightly. Complacency rules. (All you need do is read the financial rags to know that.)  The indicator remains 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 1/16/03

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

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 1/16/03 

The sideways down phase in the 6-7 week cycle may have ended. HUI's downside cmap of 139 was hit, and short cycle oscillators are beginning to reverse.  The 13 day cycle initial upside cmap is 151 on HUI and 365 on gold.  The 6 month cycle cmap will rise to 187 on HUI if it can get through 155, which Doc thinks is likely.  The 6 month cycle target on gold is 375-385, and 405 on the 1 year cycle.  The 13 week cycle remains in a down phase, the low of which is due within a week or two. After some backing and filling through the end of the month, an extended move up should ensue. 

Charts as of 1/16/03 Close

Uncle Buck's Illness Comments1/17/03 6:30 AM. Updated in AM edition

Uncle Buck tanked again last night, hitting a low of $100.40 before trading up to 100.56 at 6:30 AM NY time. The 10-13 week cycle cmap is now 98-100 but the 6 month cycle cmap has dropped to 93.50. Short cycle lows are due within days at a cmap of 99.50. Although a 6 month cycle sideways up phase is due, the 1 year cycle is heading lower.  Chart as of 1/16/03

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