The Anals of Stock Proctology

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Big Fine Print Doc does not make trading recommendations. This update reports time cycle estimates and centered moving average projections based on the Hurst cycle analysis method, and other techniques. 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? More disclaimers at the bottom of the page.

Doc welcomes the many new junior stock proctologists who have joined the American Society of Shortsellers in the past week. If you are not an experienced chartist or trader, ok, even if you are, you may find the Anals just a bit confusing for a little while. But Fear Not! You will get it after a few days, at most a couple of weeks. Questions can always be posted on the Stool Pigeons Wire message boards, where Doc and/or your fellow stoolies will respond. Explanations of abbreviations and terms are at the bottom of the page. The complete list of links to the entire archive is in the left column menu. Now it's time to sit back, relax, and enjoy the show.

Many tanks!

Doc

Intraday Updates 1/30/03

12:30 PM (Chart below.) Intraday cycles are uncular (as in nukular). However, it is clear that the 3 day cycle has turned down. The 8 day ozzie has also rolled over in the QQQ, which usually leads the broad market. The posted times are my best guess. They'll probably be off, but the failure to hold or retest the high is a key sign that things are turning down in multi-day cycles. .

9:15 AM Fucutures are up this AM. The upside cmap for the SPX, based on fucutures action, (never reliable), is 867. QQQ is up also. The cmap is 25.54. These should be hit soon after the open, in a second top on the one day cycle following the high made just before yesterday's close. Then I'd expect a pullback into an 11 AM low, followed by an upward reaction. If the reaction makes new highs, we'll need to reevaluate the short term picture. pheyeh!

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Intraday Wednesday - The market drove relentlessly higher all day after diving on the open into a 1 day cycle low, then retesting it at 11 AM. The turn had all the earmarks of a buy program kicking in off a double bottom on the charts initially, (by whom?), and began to take on the bad small of a short squeeze later in the PM. Upside cmaps were broken repeatedly as the market went parabolic. The highs were finally made a few minutes before the closing bell in a repeat of Tuesday's pattern. By days end, the late pullback pulled the cmaps for 1 day through 8 day cycles back to a level the market had reached a few minutes earlier. The QQQ and SPY's gave strong sell signals on their 1 day cycle oscillators after the bell.

Look for weakness at the open again Turdsday, with the 1 day cycle low around 11 AM NY time again. Doc can't say yet how weak tomorrow's open will be. As always it depends on the fucutures and their manipulation, or lack thereof. More important, I wants to see how long the reaction rally lasts and how high it gets. An early failure on a retest of the highs, or a failure to retest today's highs, will signal the top of the 8-13 day cycle swup.

Pre Market 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 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

Some News Is Noisier Than Other 1/29/03

Today reminded us again that news is noise. President Hoover's SOU was news. Well, sort of. The big rock in the pond. The rest of the world hated it, the fucutures took a huge dump overnight, and the market sold off in the morning. But the 8-13 day cycles had just turned up the day before. This cycle wasn't ready to turn down yet. And being very early in the 10-13 week cycle, it isn't ready to nosedive yet. When the averages made a little intraday double bottom, that set off a buy program and it was off to the races until the Feed announcement at 2:15. At that point an intraday cycle high was due. The market waffled around for while after the FOMC did its Seinfeld thing. The announcement was about nothing. Nothing was the subject of the announcement. Sorry, nothing doing. But nothing was good enough. The market was expecting nothing, and it got nothing and went up. But it wasn't nothing that made it go up. It was the fact that there was nothing in the cycles to stop it from going up. The 8-13 cycle dip jerks were willing and the 10-13 guys aren't quite ready to throw in the towel. Too soon.

Aside from those minor news items, the real important news of the day was the release of the MoGauge from the MoGauge Bankers Ass. of America. According to them MoGauge applications were up a bit last week.

Mortgage applications get funded about 4-8 weeks after the application is taken. 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. 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.

Refi's upticked, but extraordinarily low mortgage rates are not producing the kind of kick to the market that they did four months ago. The market is being been satisfied at this level and demand is slowly waning. We can only imagine after four months of record refi's what the credit quality of the most recent borrowers must be. Purchase apps also continue to make lower highs in an 8 month long trend, despite record low interest rates. Doc wonders how the builders and rattlers are reporting record new and used home sales with mortgage applications declining. I guess all the buyers are paying cash from their stock market winnings.

The key is those bond yields. The 10 year bond is the benchmark for the 30 year fixed rate mortgage. If yields stay flat, the refi game that fuels the credit bubble will continue to shrivel. Broad money supply will shrink and all markets will come under pressure. If bond yields start higher, as Doc suspects they will in the weeks ahead as capital leaves the US markets, that could trigger financial collapse.

Tomorrow we'll see how the bubble is faring in the money supply in the Fed's Turdsday releases. The link below is to last week's data.

Fed Releases Turdsday

Doc's Pooper Scooper.

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The Feed drained $2.25 billion Wednesday by adding $1.5 billion in overnight repos while $3.75 billion expired. The $1.5 billion are the only expirations Turdsday, outside of the usual 28 day repos, this round totaling $3 billion.

Today's rally was a bit shocking in view of the draining operations. The market gave Al some breathing room to Feed if he wants. Bonds were cranky however, and the bond market isn't going to like excessive Feeding.

The Feed Index remains unchanged over the last two months. Without Feed growth the stock market and the economy will founder, but Al is apparently focused on stabilizing the dollar and keeping long term interest rates stable. So it will be interesting to see if they Feed enough, or keep draining the swamp gases.

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 remains in a short term downtrend. Without massive Feeding and an uptrend in the Feedometer, stock rallies will not stick. The liquidity isn't there. Institutions have too little cash, and foreign investment is net negative. It's Feed or else.

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 rose. It now looks like the 10-13 week cycle has been in a sideways up phase since the beginning of the year. We need to watch for signs of a pickup in upside momentum. So far there are none. The 13 day cycle up phase would have to carry through 4.05, and it only has a day or two to do that. If they can do that, there's a good chance of a test of the highs. The breakout would come on the next cycle.

Long Term

Dow Inflatables- The Dow's 4-7 week cycle cmaps still point to the 7750-7900 range. The preliminary cmap for the 10-13 week cycle moved up to 7650. With at least 8 weeks to go, there should be big changes in the projection as we get into the latter stages of that cycle. The question bothering most of us is how high is up on this 13 day cycle up phase. It's too early to answer for sure. So far it looks like 8150 could be it, but the market could surprise. Just like it did today by not falling apart.

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 short cycle oscillator rose out of the bottom zone. That's two days up so far. Normally, the first such turn results in a one or two day bounce, then the market heads lower again while the indicator diverges, leading to a bigger rally on the second upturn.

The 13 day cycle sideways up phase did what it should. If we had all turned off the TV and stopped following the news, none of us would have been surprised by the market being up a couple today. That's what it was supposed to do cyclically. We just got thrown off by the futures overnight. Wasn't the first time. Won't be the last. We should stop paying attention. Or learn to use counter cyclical moves to our advantage. With the 13 day cycle turning up, the selloff would have been a perfect opportunity for scalpers to grab some short side profits. Ah, hindsight!

The 4 and 6-7 week cycles continue lower. A low is due on the 4 week cycle in a few days, and the 6-7 week cycle in a few weeks. The 17 day rate of change is in a downtrend. The downside cmap on the 4-7 week cycles is now 810-840, subject to adjustment each day until the low is behind us.

10-13 Week Cycle

The 10-13 week cycle oscillators are heading down. The 29 day rate of change is moving ever so gradually lower. We could see a drip drip bounce, drip drip bounce, for weeks. The preliminary cmap is now 810, but look for that to go lower.

Yesterday I wrote, "Because it is so early in the 10-13 week cycle there are still plenty of dip jerks out there, so the next few weeks of the down phase are likely to be choppy, with a series of short rallies and declines that should establish a pattern of lower highs and lows."

Amen.

Sentiment

VIX fell again. (up on the inverted scale chart). The touch of the lower channel coincided with a short cycle low. This is an interim low. Over the next few weeks the channels will turn lower. The next big intermediate cycle low should see VIX at least 50-60.

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 1/29/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	750p
6 Month	Down/1-10W	725p
10-13 Week	Top-Down/28-43	810p
4-7 Week*	Down/0-12	810-840
8,13 Day	SWU/0-1	869

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 1/29/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7M	1000p
6 Month	SWD/1-10W	1180p
10-13 Week	Top-Down/31-46	1300p
4-7 Week*	Down/1-15	1260-1295
8,13 Day	SWU/0-1	1365

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.

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

Long Bong Hit - See top of page.

Golden Stool Comments 1/29/03 PM

Gold and Cousin HUI got whacked. HUI remains in a 10-13 week cycle sideways down phase which should end within a few days. The downside cmap is 141. The 13 day cycle cmap is 137-142. Gold hit an upside 10-13 week cmap of 371 and pulled back. Its 6 month cycle cmap is 385 and one year cycle cmap is 400. HUI has a 6 month cycle cmap of 180-85. Doc thinks the double top in HUI will lead to only a small correction before the uptrend resumes in a few days or weeks at most.
Charts as of 1/27/03 Close

Long Term

Uncle Buck's Illness Comments1/29/03 PM

Uncle Buck was down just a bit after a big overnight selloff and recovery. Short cycle cmaps still point to around 98-98.50 but the short cycle oscillator has turned up suggesting a brief sideways up up phase. The 10-13 week cycle remained at 97.50 with 6 month cycle cmap at 93.50. Chart as of 1/29/03 close

Long term

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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