The Anals of Stock Proctology

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Doc will be traveling until October 23, God willing. The Anals will be published in a scaled down format, whenever possible. Pre-market and Mid-day updates will be published irregularly. There will be no mid-day update Thursday or Friday. I will try to do pre-market updates both days. Publication notices will be posted on the message board during this period. Since we are nearing a short term turning point, I'll do my best to report to you regularly on how the charts look.

Suctors and Stoolwethers will not be updated today.

Road Apples For Monday 10/14/02 - Keep Hope Alive

Doc had a few chuckles reading over today's Intraday Stool. The funniest one was perhaps the idea that the Fed was doing "hidden" coupon passes. With today being a bank holiday, and the Fed, government bond market, and domestic banks closed, one wonders who at the Fed was doing those coupon passes, via what means were they passing, and to whom they were passing them. Sounds to Doc like the only thing that got passed today was gas.

Doc is thinking back also to a month or so ago when he theorized that the stage managers were in the process of engineering a perfect bottom. Doc had forgotten about that, but lo and behold, looking at tonight's charts, the light went back on. Doc is filled with admiration at the skill and daring of Wall Street's stage managers and stunt men. They did, in the end pull off a perfect stunt dive, right into the net. And the audience bought into it, hook line and sinker! This is exactly what Doc had speculated would happen.

Barnum is, once again, proven right. Unfortunately for the suckers, they are going to get taken to the cleaners again, sooner or later . Probably sooner. Markets simply do not work this way, with the promoters educating the public as to what a bottom looks like, then engineering a stage show which meets perfectly the criteria which the public has been thoroughly trained to buy into.

I'm sorry, but it just doesn't work that way. What the Street has in its sights isn't a bottom. It's just another ass. One that they can pump more stock into.

Doc heard that the mutual fund industry will be hiring Jesse Jackson as a spokesman. He'll be barnstorming the country giving his "Keep Hope Alive" speech to mutual fund seminars and corporate shareholder meetings.

Vanguard and Fidelity will be using it for their telephone "on-hold" messages.

And that's just the way it is, always has been, and always will be. But one thing is for sure. Before this bear market is over, hope will be dead, and a whole bunch of these big stock promoters will be too.

The Feed hasn't been doing enough to change anything. This is about asset allocation and unwinding of options related hedges by the stage managers.

SPX- What direction will this 10-13 week cycle up phase take? Unless the sphincters can close the index above 850, it will be no more than sideways. There's a chance that could happen, but there are also 2 short term cmaps which point to 860+/-, which would tilt the wave slightly upward.

Sentiment and Momentum Indicators
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 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.

Doc has increased the width of the cycle channels to reflect the market's increased volatility. The 10-13 week cycle oscillator still have not fully confirmed the turn. That means there's still a probability of a big pullback, and possibly even a retest of the lows, in the context of the beginning of this up phase. What it all adds up to is 3 to 5 weeks of churning as distribution by corporate and market insiders continues.

The red channel is the idealized 2 year cycle. Dark blue is the 10-12, or 6 month cycle. Teal is the 10-13 week cycle. Purple is the 4 or 6-7 week cycle.

Fiber Nacho Reflux Levels- Resistance and Targets

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 10/14/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/3-4 Mos.	680-700
10-13 Week	Bottom-Up/13-28	Too Early
6-7 Week	Up/2-11	862
20-25 Days	Up/2-7	849
8,13 Day	Up/0-1	841-861

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

Golden Stool-

Doc still thinks the HUI index chart is "constructive". The consolidation of the bull market continues. It's been painful, because of the inherent volatility of the components, but the chart is undamaged, and the move has so far conformed fairly well to what Doc had expected. Now comes the tough part. The 6-7 and 13 week cycle lows should be forming, so we'd now want to see a base form between current levels and not to far below the recent lows. That's probably a good bet because the 10-13 week cmaps moved up to the level that was hit last week.

Suctor Watch and Stoolwethers- Now posted on separate page. Updated each morning between 8 AM and 9:30 AM NY time. Suctors and Stoolwethers will not be updated Thursday (10/10/02) or Friday.

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.

ABBREVIATIONS:

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