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The Anals of Stock Proctology

Published weeknights by 8:30PM Happy Acres, Florida Time
Weak End Edition Saturday Afternoon

The American Academy of Stock Proctology and
the American Society of Shortsellers
Dr. Stepan N. Stool, A.S.S. Chair

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Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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Pre-market, PM and 4:00 updates are here.

Closing Markets 8/4/03

Cycle Conditions Tables 8/4/03

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. Charts and discussion below. Note: The Cycle Conditions Charts and daily discussions are updated daily, and supercede the weekly long term chart discussions.

SPX (Charts and Discussion)

Cycle	Phase/PTT	Target
6 Month	SWD/19-29	??
10-13 Week	SWD-Bottom/0-11	??
4-7 Week*	Top-Down/1-11	963-976
5,8,13 Day	Down-Bottom/0-2	974-960p

Nasdaq (Charts and Discussion)

Cycle	Phase/PTT	Target
6 Month	SWD/19-29	??
10-13 Week	SWD-Bottom/0-11	??
4-7 Week*	SWD-Bottom/0-11	1700
5,8,13 Day	Down-Bottom/0-2	1650-1710p

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 overlap. The dominant cycle is reported.

Cycle Map 8/4/03- Doc's best guess on where the market is headed over the next few weeks.

The 6-7 week cycle, and an occasional 4 week cycle, have been the dominant waves in the market for the last several months. That should continue, with even shorter waves growing in amplitude, until the down leg gets a push. We could see big swings on the 8 and 13 day cycles, or conversely, all cycle amplitudes will diminish and the market will just go even flatter until the down thrust begins with a breakdown bang. In fact, both processes seem to be occurring, as the range narrows, and shorter cycles become more apparent.

The 10-13 week cycle does not appear to be a significant force at this time, and its upturn may have aborted. It could still be in a down phase with up to 11 days remaining. If not, it's in a sideways up phase that could last several weeks, but go nowhere. The up phase is unlikely to have any thrust because longer waves are no longer driving higher. There's no gearing and no traction. With bigger waves starting to roll down, the 10-13 week up phase will be running up a down escalator.

The 6 month cycle is in a sideways down phase that hasn't turned down. However, the final days of any cycle are often marked by sharp declines. The indicators for the 6 month cycle are still heading down but prices haven't yet. That may be about to change, but until it does, the market should oscillate in a range with a central tendency around 990-1000. The size of the oscillations will vary depending on how many of the shorter cycles are in gear, as their effect in concert is cumulative. They work against each other when out of phase, leading to indecisive rangebound action such as we've seen. The extremely long term trendlines, shown below on the weekly chart, passing through the current range act as a powerful price magnet as well.

With the 4 and 6-7 week cycles now apparently turning lower, following a cycle phase that failed to go the distance of the range, chances of breaking below 965 are improving. But by the same token, there's a limited mount of time in which a break could occur, and time is running out on this cycle. It's possible that this dull, sideways trading range could continue for another month or two.

18 Month Cycle ________ 10-12 Month Cycle_______ 6 Month Cycle_______ 10-13 Week Cycle______
6-7 Week Cycle________

Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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MoGauge Disaster! 7/30/03

Doc will be taking vacation days Friday August 1, and Friday August 8. The regular Weak End Anals will not be published. Friday pre-opening updates will be published.

The PM and closing intraday updates, Feed Analysis, and Uncle Buck and the Long Bong hit will not be published Friday. The regular Weak End Anals will not be published. If possible, a short Anals will be posted late Sunday evening. Regular publication will resume Monday morning.

Dow Inflatables 8/4/03- The 6-7 week cycle has been the dominant trading cycle. The Dow went up, hit the cmap of 9350, and reversed on Thursday, then on Friday slightly broke the trend channel which has contained its action since March 3. Today it came back to close on the trendline. The action seems to be more and more incoherent within an ever narrowing range, with most oscillators converging on the zero line. As some stoolies like to say, it's a flat squeeze. Meanwhile, it's time for another 13 day cycle up phase. It won't get too far.

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.

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Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
Stoolwethers and Suctor Watch

Portfolio Sphincters Index (SPX) and Sentiment 8/4/03

Cycle Conditions Table

Cycle Chart
The dark blue channel is the idealized 18 month-2 year cycle. Magenta is the 10-12 month cycle. Green is the 6 month cycle. The thin red and blue channels are the 10-13 and 6-7 week cycles, as projected. Those projections shift day to day in response to the market.

The 10-12 month cycle indicator has turned down while the 6 month cycle is still downtrending. Shorter term indicators are all headed toward the zero line, confirming a flat trend that could get flatter before breaking down. If the breakdown does not come within 11 days, during which time the 6-7 week cycle is due to be heading down, then we're faced with the likelihood of sitting through another weak up phase lasting a couple of weeks.

Sentiment

VIX finally began to show an increase in nervousness, moving up sharply Friday (down on the inverted scale chart) and nearly breaking the pattern of extreme complacency that has persisted for three months. Today it looked like the break would be finalized, but complacency returned rapidly when the market began to recover. Hitting 20, then reversing, has repeatedly marked major tops over the last five years. In the final stages of the top, sentiment remains ebullient well beyond the highs, as the crowd trades in the rear view mirror, endlessly extrapolating the recent past into the future. This is one reason to stay bearish, regardless of how long the top takes to complete. We have been in a mania, and manias end badly. Without exception.

From Investors Intelligence last week, bearish advisory sentiment remains extremely low, hanging around 19.5% down from 19.8% last week, after a 16 year record low of 16.1% on June 13th. Bulls rose to56.5% from 55.2%, not that far from its June 13th reading of 60.2%, the most bulls since February 2001. Bearishness is falling and bullishness rising again, in spite of the market going nowhere for more than a month. It is such shifts which usually accompany the trend reversal. However, sentiment is likely to remain bullish long after the turn.

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 blue line overlaid on the price chart 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 8/4/03

Here's the current long term projection for the SPX. Note that a 61.8% fiber nacho retracement of the last leg down is complete. Longer term cmaps had suggested that a final burst to 1050-1075 could occur. Long term upside cmaps don't always get hit. Given what's going on in the liquidity picture, Doc likes the projection below, which is more like the forecasts from past months. It points toward a retest of the lows no later than the second quarter of 2004 and a sub 700 SPX by 2005.

Upon examination of past lows in the mid 1990's, Doc saw two critical lines relative to the massive Hunchback top spanning four years. The first line now projects through 995. The second is around 961. Getting below both levels would create a WHOPsaw, a massive false breakout that fools and traps the majority. The 10-12 month cycle oscillator is turning down suggesting a move to 900 over the next few months, enough to turn the 18 month cycle lower as shown.

The longer the nominal cycle length the greater the variance in the actual length of the cycle. The 18 month cycle can range from 12 to 24 months. The nominal 4 year cycle can be 3 years. It can be five years. Four years, give or take a few months has been most typical, especially in the latter half of the twentieth century, but a 3 year cycle is not uncommon. In the first half of the century, cycles frequently lasted 3 or 5 years. Hurst called them "nominal" cycles because cycles vary in length. Looking at charts going back 100 years or more you can see that a 1 year variance is not uncommon for the 4 year cycle. (Subject to change without notice. Dealer title, tax, and tags not included. Consult your local directory for prices in your area. Past performance is not necessary to be a Wall Street analcyst.)

The Portfolio Sphincter's Index is now 43 weeks off the October lows. Hmm, let's see where the Nikkiu was 43 weeks after its 1992 bubble bust low. The similarities are... spooky. Is this a blueprint for our future? Stay tuned.

The US bubble bust markets have been following the Nikkiu model with but minor variations for nearly three and a half years. Given that the systemic responses have been similar, I see no reason to believe the outcome will be different this time, i.e. years of stagnation followed by another collapse.

The wild sentiment readings and the concentration of speculative activity in the market's worst pieces of trash suggests an exhaustive blowoff of historic proportions. Be that as it may, the rally has pushed long term cycle oscillators to the point that should they rise any more, a change in the long term secular trend would be indicated. It appears that longer term cycles are turning flatter, similar to the Nikkei experience of the 1990's. That still leaves prices at, or near, the top of longer term channels, portending a major decline ahead. But instead of looking for lows in the mid 600s next year, the pullback would probably only go into the low 800s.

Basic Edwards and Magee Update- The oldest, and simplest of the modern era theories on technical analysis may still be the best. This chart suggests that the long term downtrend is probably still intact, and that the last two weeks of the rally were an exhaustion move, just like in March of 2002, May of 2001, and September of 2000.

Here's something interesting. In July of 1998 the market launched a counter trend selloff. It lasted 12 weeks. The high of the move was 128.7% of the low. The recent rally phase lasted 15 weeks. The high of the move was 128.7% of the low. Here we have examples of two huge countertrend moves which went to extremes in violating long term trendlines. The July 1998 example bent, but did not break, the bubble uptrend. The recent rally was a mirror image. Except now, there's no reversal. Instead we see consolidation. Is it distribution, or accumulation for a final blowoff? The cmaps say, there's a final blowoff ahead. The Nikkiu model says, the goose is cooked right here. The short term indications Monday and Tuesday will hopefully give us an answer.

Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
Stoolwethers and Suctor Watch

Nasgap Charts 8/4/03

Cycle Conditions Table

Lots of bearish things are happening on the Nas chart, including the rollover of the 10-12 month cycle oscillator, and the fact that all other indicators but the 29 day RoC are heading down. If the 29 day RoC turns down, we are looking at a big, extended decline. But an upturn, with a short term push to retest the highs, is also possible, as the flat trading range continues with little concrete indication of imminent breakdown.

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 8/1/03

Looking at the 18 month cycle cmap, the indication is that the 1750 area is the top on the Nas. A run to 1850 is possible as long as the 12 month cycle indicator stays in positive territory. Once that rolls over, it's over. It looks like it's starting. The rollover could take 6 days or it could take 6 months. The Nas needs to get below 1600 to confirm the beginning of the 18 month cycle down phase. That would also be the point at which the index falls back below the neckline of the huge 4 year long Hunchback top formation.

Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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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.

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
RoC: Rate of Change
sto: stochastic
swup: sideways up phase
swdp: sideways down phase

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