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 2/4/03

12:30 The 1 day lows were made around 11 AM. The market is in a sideways up phase, expected to top out between 12:30 and 2 PM. A down phase in the PM should move toward the 3 day cycle cmap of 825late today, or tomorrow AM. 8 day cycle down phase has 1 or 2 days to go. Chart below.

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9:15 Fucutures have erased yesterday's gains. Look for a 5 hour cycle low in the first hour followed by a retest or lower low at the 1 day cycle low later in the AM. Always be flexible as to time frames for lows. Cmaps tend to be more reliable. When you get both and oscillators are in the zone, it's a gift. Time to act. Reaction up phase should last through mid-day. The down phase should break down the 8 day cycle, assuming there's no surprise recovery.

Intraday Monday - The market opened strong. It made a peak around 10:30, followed by an 11:30- 12:00 double bottom. Intraday waves apparently downshifted to 3 hours from the norm of 5 hours to 1 day. A retest of the highs followed at 2 PM and 2:30. The down phase lasted until the last half hour.

The 3 day cycle topped out, but are we looking at a sideways down phase followed by yet another pop? It's too early to determine that, and whether the 8 day cycle topped out, but odds are that it did or that it will tomorrow. Monday was the 7th day from the last 8 day cycle high, and the 5th since the low. The market fell just a couple points shy of hitting the 3 day cycle upside cmap on the SPX.

Tuesday we should see a second low on the 1 day cycle in the first hour. 5 hour and 1 day cycle highs should come in the 12:30- 2:00 slot. A strong early selloff, or a weak up to follow, would signal the top of the 8 day cycle. But given the long upleg, look for the swup in bigger cycles to continue.

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

Monday's Markets

Time On Bears' Side, But Not Their Putzes' 2/3/03

Just a quick summary tonight. The market traded in an exceedingly narrow range. The swup continued. How much longer is anybody's guess. All we can do is wait for the market balance to tip. The 4 week cycle is up, but this is normally a non issue when bigger waves turn down. The 6-7 week cycle still has 4 to 9 days to go in its down phase, with cmaps a bit below current levels. This has been the key trading cycle of late and should carry the market lower. The big 10-13 week cycle is just starting to turn down and still has a long time to run, as much as 9 weeks. In retrospect, when it's over Doc suspects that we will look at the current action as still being in the context of a 10-13 week cycle top. More importantly it is a one year cycle top, which can last as long as 6 months.

After the 6-7 week cycle low in the next week or two, we should see one more swup lasting from somewhere in mid February until near the end of the month. After that look for March not to come in like a lion, but a big smelly old grizzly bar. And go out like one too.

But in the short run, it could be frustrating, and if the down phase is delayed as long as it potentially might be, erosion of time premiums in options is going to be a problem, a problem those short stocks don't have.

Fed Releases Turdsday

Doc's Pooper Scooper.

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The Feed drained $2 billion. $5.75 billion in weekend repos expired and only $3.75 billion were added. The $5.75 billion will expire Tuesday. $5 billion in 9 day repos will expire Turdsday along with the usual 28 day rollover, this time in the amount of $3 billion.

Total feed remains in a neutral trend over the last 10 weeks, and contrary to the popular belief that the Feed is aggressively reflating, the 1 year growth trend is only approximately 6%, which is well below the 2001-2 rate of 10%.

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 a 5% 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 in a downtrend, indicating the Feed is draining excess liquidity from the system. They may have two goals in mind. One, supporting the dollar and stemming outflows of foreign capital, and the second, calming inflationary fears that are bubbling near the surface in the bond pits as commodities skyrocket. If those fears should surface, the worst case scenario will begin unfolding.

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 upticked slightly. Indicators remain mixed and neutral in the short to intermediate term as part of a long term secular bottom. Long term downside cmaps have been met. On balance, short cycles are due to turn lower for a week or two, but there is no sign of a large move.

Long Term

Dow Inflatables- The chart below indicates a 6-7 week cycle cmap of 7550. That's due in a couple of weeks. Not shown is the fact that the 4 week cycle downside cmap of 7950 was hit. The 4 week cycle is heading up in a sideways up phase. It's what has kept the market from falling apart. It should end within days. The Dow will then head toward the 6-7 week cmap. The 8-13 day oscillator signals that the top may be in.

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 continued to rise. The 4 week cycle is in a swup, having already met a downside cmap that rose to 840. The 4 week cycle up phase normally manifests as a slowing in the downtrend or a sideways movement when longer cycles are heading lower. This movement began 6 days ago (not 54 as I typo'ed yesterday. Let's go proofreaders!) It could extend for up to 5 more days during which time the short cycle oscillator will rise while the index treads water.

The 6-7 week cycle continues lower, and this should keep a lid on the upside potential. The 6-7 week cycle low is due in 4-9 trading days. If the 4 week cycle holds up for a week, then the swup could extend for 2-3 weeks beyond that. Wouldn't that be special?

But I hope that won't happen. The 17 day rate of change remains in a downtrend. The downside cmap on the 4-7 week cycles is 830. The 6-7 week cycle oscillator on the chart below is getting into a bottom zone. When larger cycles are in a down phase, the upturn in this oscillator will lead the price upturn by several weeks. Chartists are familiar with this as a positive divergence. The second upturn will usually mark the start of a rally. The process of making a low, then a higher low, then an upturn usually takes about a month. Also, this indicator is not delimited. In unusual circumstances it might drop well below the level of recent lows. So we have time.

10-13 Week Cycle

The 10-13 week cycle oscillators are heading down slowly. The one in the top chart is getting into a bottoming zone. This is a delimited indicator that can only go as low as zero. It can stay low for weeks. When it forms a trough, and then begins to rise above the trough area, that would be the time to cover swing shorts. The 29 day ROC and the Stoolicator should confirm at that point.

There should be 6-9 weeks remaining in this down phase. The 29 day rate of change is still trending gradually lower, a sign of weakening demand and steady selling pressure, i.e. distribution. The preliminary cmap has risen to 830 as a result of the last few days of stability. Cmaps are moving targets, potentially revised daily based on the market's current action. It is very early in the cycle and the number will change frequently until the lows are reached. One big down day in the next week or two will the move the target substantially lower.

The next week or two should continue to be choppy. The dip jerks haven't given up yet. Even after nearly three years, they still don't have a clue that their models do not work. Or they do, but don't give a damn. Because, repeat after me class, "It's not their money!" As stoolies, we know i's not ours either, but it probably is your brother-in-law's.

Sentiment

VIX declined. (up on the inverted scale chart). The touch of the lower channel last week coincided with a short cycle low. Over the next few weeks the channels will turn lower and we should see much bigger numbers on VIX. The next big intermediate cycle low should reach at least 50-60. A declining number on the VIX as the market goes sideways is bearish.

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

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 2/3/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	720p
6 Month	Down/0-9W	750p
10-13 Week	Top-Down/25-40	830p
4-7 Week*	Down/0-9	830-840
8,13 Day	SWU/0-1	868 Done

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.

Suctor Watch and Stoolwethers- Updated each morning between 8 AM and 9:00 AM NY time.

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

Nasdaq Cycle Conditions as of 2/3/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7M	1000p
6 Month	Down/0-9W	1200p
10-13 Week	Top-Down/29-44	1280p
4-7 Week*	Down/0-11	1240-1310
8,13 Day	SWU-Top/0-1	??

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- Updated each morning between 8 AM and 9:00 AM NY time.

Long Bong Hit - See top of page.

Golden Stool Comments 2/3/03 PM

Gold has reached an uptrending resistance line. It will either blow through after consolidating for a few months, or it may trend below the line. It has probably gone as far as it's going to go for now, but, $400 by mid year is a foregone conclusion based on longer term projections. While there are indications of probable consolidation, there's no sign of significant pullback. Cycle Oscillators have been adjusted to more closely conform to dominant cycles in gold, which vary slightly from other markets. The dominant intermediate cycle is nominally 4 months. That cycle is beginning a down phase which is expected to take the form of a consolidation.

Charts as of 2/3/03 Close

HUI's 4 month cycle has been in a sideways down phase for 6 weeks. The end of the down phase is due in two weeks. Doc thinks it's a bad idea to be short these stocks. In the short run, HUI's shorter cycle downside cmaps are 138 to 140. Ditto for the 10-13 week cycle down phase, which is take the shape of a flat trading range or sideways down phase. A 13 day cycle low is due now, but the 4 and 6-7 week cycle down phases could extend from 1 to 3 weeks longer.

Long Term

Uncle Buck's Illness Comments 2/3/03

Uncle B has gone into an up phase in his 13 week cycle. Given the downward slope of longer cycles, the up phase should be no more than a consolidation in the downtrend, although it could feature a brief rally at the beginning of this up phase. The 101 area looks like a ceiling. The upside cmap on the 13 day cycle is only 100. Longer term cmaps now look like 96.50 and possibly 92, around mid-year. Doc is not a big believer in intermarket analysis, but Uncle B and SPX (gray line on chart) usually move in the same direction at the same time. Relative magnitude varies greatly, however. An up phase in the dollar suggests that we should be alert to the possibility of stocks stabilizing as long as Uncle Buck does.

Chart as of 2/3/03 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