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.

Update 10/9/02 1:00 PM Terms and methodology

Cain't git it up. They came down pretty much as expected. OK, a little worse. The 1 day cycle low that was due at noon, came at 12:30, and the upturn is generating little enthusiasm. That leaves us in a kind of void, a no man's land. If they don't get traction, the next low would be on the next 5 hour cycle low due at 3 PM. The cmaps below are keyed on the assumption that the 5 hour cycle is topping out as of 1 PM. However, if they can hold the lows established at 12:30, then the 1 day cycle can swup until 3 PM. The last hour should be flat to weak. The 8 day cmaps indicate most of the damage has been done for this cycle. Could see a few days of respite.

I will be out for the remainder of the afternoon.

Cycle	Phase	Target	Due
5 Hour
Nas	Top/Down	1100	3PM
SPX	Top/Down	767	3PM
NDX	Top/Down	795	3PM
8 Day
Nas	Down	1100	Thursday
SPX	Down	765	Thursday
NDX	Down	785	Thursday

Update 10/9/02 9:15 AM Terms and methodology

Based on the late action yesterday, Doc was looking for some "backing down" into a Noon 1 day cycle low. With the sharp selloff in the fucutures this morning, it looks like the 5 hour low will be right after the open, at levels lower than what was projecting at the close yesterday. After the obligatory bounce, we may see lower lows at the 1 day cycle low due around mid day. The 8 day cmaps could be hit today. If we get a big Feed, look for another melt-up late in the day. If not, this could be a bottomless pit.

Cycle	Phase	Target	Due
5 Hour- 1 Day
Nas	Down	1105-1110	9:45-10:30, Noon
SPX	Down	786	9:45-10:30, Noon
NDX	Down	792	9:45-10:30, Noon
8 Day
Nas	Down	1095	Thursday
SPX	Down	760-770	Thursday
NDX	Down	775	Thursday

Doc does not make trading recommendations. This update reports intraday time cycle estimates and centered moving average projections based on the Hurst cycle analysis method. Doc assumes no responsibility for the accuracy or inaccuracy of these estimates and projections. The market may or may not meet these projections. New stoolies should thoroughly familiarize themselves with the methodology before trading based on this method. There is no free lunch. 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.

About Dads (and Moms too) (10/8/02)

I have been fortunate to have never had to face the mortality of anyone in my immediate family. My grandparents passed on when I was too young to remember. My parents are still around. It was a string of luck which of course I knew would end.

My Dad, Mom, and I got some bad news today. But I still count myself as fortunate. I am blessed that this kind, decent, quiet, and dignified man is my father, and that I will have him here for a little while longer.

In the days ahead, I am gong to be spending more time with him, and just a bit less time working on Capitalstool. I deeply appreciate all the support I've gotten from all of you! I told Dad about all your prayers and healing wishes. He feels very honored.

I feel honored too. Honored to be a part of our special community, and honored that Sid Adler is my Dad.

I'd just like to remind you, that no matter how important trading the market may be in your life, NEVER let it interfere with that which is most important, your loved ones. Now, go give your spouses and kids a hug, and if your Mom and Dad are still around, give them a call to let them know you are thinking of them. Then go see them this weekend and give them a hug too.

Do it for Doc.

Lee Adler
aka Dr. Stool

The Feed did nothing again today. There were no repos and no rollovers, yet again. The act of "no action" is, in effect, a tightening, because it fails to sustain the recent 8% growth rate, itself a downshift from 10% growth.

No Feed, no jam. The rally was not fueled by Feed. Stocks instead moved in lockstep with bond yields throughout the day. In other words, portfolio shifting.

The Feed Index is below the 8% growth channel, and is in the lower half of the no-growth channel. The big cap market did well today, so normally we wouldn't look for a big Feed, but Utilities got destroyed. We'll see if that's a trigger for a little Feed action.

Three trends are evident on the Feed Index. 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.

Lately, the Feedometer shows that Al is doing precious little to stabilize the market The Feedometer is now so far below its monthly average that we should expect some Feeding, but a really big Feed would be a shift from their recent stinginess.

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

10 Year Bond yields were up a tick at 3.64. Prices remain in a mid-channel consolidation. The 10-12 month cycle cmap is 3.65 and the 6 month cmap is 3.50, also a long term resistance level. The intermediate cycle oscillator has turned up, but it's too early to jump to conclusions. We need to see confirmation from other indicators. Today's stock rally appeared to be fueled by simultaneous bond liquidation which began at noon. A bit of an uptick in bond yields should correspond with the next 10-13 week cycle up phase in stocks.

Financial and Economic Indicators October 3

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

8 Minute Bar Charts 10/8/02
Dow Jokes Inflatables +78.44

Portfolio Sphincters Index-SPX +13.21

Nasgap +9.59

The charts at left show the prior day's action in 8 minute bars with stochastics at %K 26, %D 18, a proxy for the 1 day cycle.

The Dow had another quiet, 300 point range day. If you like roller coasters it was your kind of day.

The market exploded up at the opening bell. That was no surprise, as we saw the 5 hour low at the close on Monday. It then sold off steadily to a deep negative at the 1 day cycle low at noon. Then they did an about face on what appeared to be a direct portfolio reallocation, with bonds being sold and stocks bought, right up to the close of bond trading at 3 PM. The cycle high came just a few minutes before 3. Then it melted down.

Intraday cycles had been running at 2 1/2 to 4 hours, so that may have been a low as the market headed into the close. One day cycle indicators were rolling over, however, so additional backing down can be expected into the noon hour tomorrow. Barring a substantial move in the fucutures overnight, AM lows look like SPX 792, Nas 1117, and 7420 on the Dow.

Dow Jokes Inflatables

The Dow ran up to the center line of its trend channel, then quickly backed off. The lower channel line is near 7250 Wednesday. The centerline will be at 7550. A close above that line could indicate that the 10-13 week cycle low is in.

The 10-13 week cycle cmap remains 6650-7150. The 10-13 week cycle indicator says that this cycle is entering its bottoming phase. The bottom will only be confirmed when both the signal line and smoother turn higher. The smoother is still declining. The low may be as soon as this week or as much as 11 days away.

The 6-7 week cycle indicator is in a positive divergence. This happens all the time in a downtrend. An up phase in the indicator signals a slowing of the downtrend. It is only significant if the market actually turns up, and the indicator concurrently accelerates upward following the development of the divergence. By the same token, a downturn in the indicator from this level would be a powerful bearish signal.

The amplitude and duration of the 4 week cycle has been suppressed by the sharp downslope of longer period waves. The 8 and 13 day cycle lows may be in. The cmaps for those waves moved up to 7250-7300. If the 10-13 week cycle cmaps are still valid, the last push down will be preceded by a few days of churning, in an attempt to hold these levels. Alternatively, the cmaps could come up to meet the churning. Either way, the 10-13 week cycle is in its final days and the risks of being short have increased for the time being.

All of Doc's cycle charts are powered by METASTOCK. (Sorry about the bull.) You've seen the software advertised on TV. Buy it now at Doc's bookstore! Best price anywhere!

Portfolio Sphincters Index (SPX) and Sentiment

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.

VIX

The VIX dipped to 46.46, back to the center of the inverted scale 6 month cycle Stool Band. This indicator is still trending. The trend is likely to continue until the lower Stool Band is penetrated.

Short Term Cycles

The SPX again fell to near its lower channel boundary during the day, and then bounced to close near the trend center line. The lower channel boundary will be around 770 on Wednesday. The center line is approximately 800. The top of the channel is around 830. It's not ready to make the move through there, and could still head lower.

The 6-7 week cycle phase is uncertain. It still has a tentative cmap of 730, due around the middle of next week. The 4 week cycle may also be ready to head lower. All really depends on the 10-13 week cycle, however.

10-13 Week Cycle

The 10-13 week cycle indicator (dark blue line, above) again fell to a new bear market low. The 10-13 week low is due at any time within 11 days. This is the problem. A lot can happen in 11 days. The final phase of the decline is usually the sharpest, but the market could do a number of things, including simply churning sideways or lower. Since the indicators for this cycle haven't turned up, there's no point in trying to anticipate. They may be a little late at the turn, but at least we'll have some certainty. At the moment, we have plenty of uncertainty except for two things. The indicators haven't turned up, and the cmaps are still out there at 700 to 760. At this point, Doc would only consider shorting on intraday scalps based on the action of intraday indicators, and would be covering longer cycle swing trades on that basis as well, especially if we see a sharp break to the downside into the cmap range. After that it's time to take a breather. We can always reenter when conditions look more favorable.

On the other hand, if you're a position trader and you've been short since last March or May, don't worry about it.

Cycle Chart
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 Dump- Support levels and downside targets.

Fiber Nacho Reflux- Resistance levels and upside targets

Long Term

(10/6/02) The six month cycle oscillator has not yet confirmed a downturn. This cycle is topping out a sideways up phase as it moves across the 2 year cycle channel. The weakness of the up phase and the amount of time left in the cycle suggest devastating losses through January. However, the descending lower trendline should be able to generate a 10-13 week cycle upturn within the next few weeks. Swing traders will want to cover at that point and look for re-entry after a rally.

The 4 year cycle can be anywhere from 3 to 5 years in duration. The 1920's bubble wave lasted more than 6 years from initial launch to final bottom, with an interim low after the crash in November of 1929, a little more than 3 years after the onset of the bubble. The September 2001 low was at a similar point relative to the 1998 low. Think of the bubble wave like a tsunami. It is far bigger, longer lasting and far more destructive than the typical 4 year cycle. The 4 year cycle is barely an eddy in the tsunami wave.

Given the 4 year cycle low in October 1998, certainly we need to be on the lookout for conditions indicating a four year cycle low. We also need to be aware that we may have already seen the low September 2001. (Hey the bulls were right! For 3 months.) Evidence of a 12 year cycle suggests that the final bear market low may not be seen until 2007.

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 10/8/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/4 Mos.	680
10-13 Week	Down-Bottom/0-11	700-760
6-7 Week	Top-Down/7-13	730
20-25 Days	No Factor/NA	None
8,13 Day	Down/0-4	790/750

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

Nasgap Charts

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.

Short Term Cycles

The Nasty bumped up a little, remaining near the center of its short cycle downtrend channel. Short cycle cmaps upticked a bit, but they remain slightly below current levels. The 4 week cycle is a non-issue given the strength of the 10-13 week cycle down phase. The 6-7 week cycle is heading down again as evidenced by the 17 day rate of change and the short cycle oscillator. The cmap is 1020, due next week. Doc would put that in the "iffy" class. (Not the 1020, just that we'll see it on this cycle.

10-13 Week Cycle

The 10-13 week cycle oscillator is still headed down. That has to be respected. The indicator has a record of timely signals. The same is true of the 29 day rate of change. The cmap is now 1010 to 1030, due within the 11 days. Longer cycle channel lines are projecting support between 1050 and 1100. These are usually pierced to some degree at key lows.

Fiber Nacho Dump- Support levels and downside targets.

Fiber Nacho Reflux- Resistance levels and upside targets

Long Term

(10/6/02) Confirmation of the 6 month cycle sell signal will come when the smoother line (red), which is a time series of the indicator line (navy), stops rising. Late signals are usually a sign of a much bigger move to come. They happen when one phase of a cycle is much shorter than typical, under the influence of larger downtrending waves. The down phase of this cycle should last into next year and carry well below 1000. The 2 year cycle trough is not due until mid year, although the price low could come several months early or late.

This is a monthly chart with long term CMAPS. Measured on a percentage basis the projected low for the 4 year cycle is 1000. On a whole number basis, it's -500. That's negative 500. ( That's where the seller says, hey, I'll pay you 500 bucks to just tow it away.) The 8 year cycle projection is purely hypothetical and probably overly optimistic. Doc expects most companies on the Nasdaq to disappear. The ones that are left, probably only Mircroprice, and Farmer in the Dell, will have to go over to the NYSE.

Nasdaq Cycle Conditions as of 10/8/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/4 mos.	850-925
10-13 Week	Down-Bottom/0-11	1010-1030
6-7 Week	Down/4-9	1020
20-25 Days	Squished	Trending
8,13 Day	Down/0-4	1090-1100

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

AM Edition Features (Previous) These features are in morning edition, published around 9 AM ET US, or the Saturday Weak End Edition, published, uh, let's see, Saturday!

Long Bong Hit - See top of page.

Golden Stool- Published daily by 7:30 AM NY time

The 13 day cycle cmap now points at 108, and the 6-7 week cycle 106. That's the good news. The bad news is that the 10-13 week cycle cmap is headed toward 102. The worse than that news is that now the metal looks like it is starting to roll over as well. But Doc still thinks it's just a correction and that the 105 +/- area will hold and form an intermediate bottom.

Uncle Buck's Illness- Published daily by 7:30 AM NY time

Buck's recovery continues. We need to be conscious that he's been a pretty good leading indicator of the stock market, and pay close attention to any break out of this trading range. Both the two longer cycles as well as the short and intermediate cycle remain juxtaposed. Doc thinks that an upside breakout is unlikely, but not impossible.

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