The Anals of Stock Proctology

Is your subscription up for renewal? If you want to renew, do nothing, unless your credit card has expired. Please be sure your credit card info is current. If your credit card has expired, you must enter the new expiration date in your Paypal account in order for your subscription to be processed. If you subscribed via Paypal, your subscription will be renewed for one year on the 90 day anniversary of your sign-up and your credit card will be charged. If you want to cancel, use the button at the bottom of the page. This applies only if you subscribed through Paypal. Mailed-in subscriptions are for 1 year. If you subscribed by prior contribution, I will send you a notice before your subscription expires. If you have any questions, see the subscription page and FAQ's. If you can't find the answer, email me.

Road Apples- Final Edition- 10/21/02

Doc is back. Your Stool will be back to full strength tomorrow.

The liquidity supporting this rally is not coming from the Fed. Total Feed remains flat, and the Feedometer shows there's not enough excess to support the markets. Could help explain the meltdown in bonds. Obviously there's some fartpolio reallocation going on, but Doc still thinks the stock rally is a derivatives melt-up. A whole bunch of calls suddenly went in the money and were exercised, forcing both naked, and some covered, writers to buy the stock on Monday. If that theory is correct the rally will end imminently.

Three 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. Feed growth has recently been at or below the lower boundary of that trend. The blue channel going back to last December suggests that Al may now be targeting an 8% growth rate. Then there's the golden box which says he's stopped growing Feed altogether over the last three months.

The Feedometer theoretically measures excess Feed available for bond or stock market jamming.

OK, money is coming out of bonds, and some of it is obviously going into stocks. The carnage is only beginning. It's going to be interesting to see how the bonds react at the 4.50 level. Remember that the 87 crash was preceded by a devastating bear raid bonds. But it took a couple months. Short term cmaps are 4.20. It's there. Could coincide with short cycle top in stocks too.

SPX-

The Sphincters have broken the 4 month downtrend. The 8 and 13 day cycles are in a top to down phase for the next 5 days. Ooops, they were supposed to start down already. Not a good sign in the big bear picture. Is this the the WHOPsaw that fools not only the majority but the other guys too? So far the indicators continue to confirm the uptrend.

VIX continues inching towards indicating a high. But it better hit that blue band before it turns higher. A reversal will confirm a top. Keep in mind, there are still no sell signals. Until there are, we have to give the benefit of the doubt to the upside. A good shorting opportunity will present itself, and we'll recognize it soon enough when it does.

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.

The six month cycle is topping out but the 10-12 month cycle is still in a sideways up phase. If today isn't reversal day, then we have to start thinking in terms of 950. Doc still thinks this should be the last rally before a move to new lows. The short cycle ozzie is up in the stratosphere. This should be the beginning of the process of building a 10-13 week cycle top. No cmap for that cycle yet, but the 4 and 6-7 week cycles are still pointed at 905-915. This ain't horseshoes, but close counts in this game too.

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.

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 10/21/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/3-4 Mos.	680-700
10-13 Week	Up/8-23	???
6-7 Week	Up-Top/0-6	905-915
20-25 Days	Up-Top/0-2	905-915
8,13 Day	Top/0-5	880-905

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- To be posted Tuesday Morning

OK. It's now or never time. There are hints of a low on the indicators, and the time is certainly right. They could try to scare the hell out of out us though, with a final shakeout . Anything below 100 will begin to bend the longer term channel lower. The 10-13 week downside cmap is 104.

Uncle Buck's Illness

Looks like Uncle Buck has stayed in his room, as Doc prescribed. Bed rest, lots of bed rest. But watch that 10-13 week cycle thing. If it turns up, Buck may try to make a run for 111, as sick as he is. On the other hand Buck's short cycle heartbeat looks like it's about to go into arrest.

Suctor Watch and Stoolwethers- Now posted on separate page. Updated each morning between 8 AM and 9:30 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

Share your thoughts on the Stool Pigeons Wire.

Renewals

Welcome, and thank you for subscribing to the Anals of Stock Proctology. Your trial subscription will run for 90 days. At the end of that period your subscription will renew automatically, unless you cancel. If you wish to cancel your subscription use the button below. If you want to renew your subscription do nothing. Your subscription will renew and your credit card or Paypal bank account will be charged. If you want to renew, be sure your credit card information in your Paypal account is current. Paypal will not renew your subscription if the card has expired!

Again, thanks for subscribing!

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