The Anals of Stock Proctology

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On The Road (10/9/02)

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.

The Feed did nothing again today. There were no repos and no rollovers as Printsalot continues to do the Tighten Up. Who knows, maybe they burned out the presses, and the new ones coming from China are tied up in port.

Tomorrow is the usual Thursday rollover of $3 billion in 28 day repos. Last week, for the first time in recent memory, the 28 day repos were not refunded. Wonder what Al has up his sleeve for tomorrow.

Remember, No Feed, no jam.

The Feed Index remains below the 8% growth channel, in the lower half of the no-growth channel. If they didn't Feed today, you have to wonder what the hell they are waiting for.

And why?

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.

The Feedometer continues to sink. It's almost as if Sir Printsalot wants to precipitate a crash. We can only speculate as to the reasoning behind this posture of inaction. Is a policy debate raging? Are they frozen into inaction? Or is there a "good reason" that they are not intervening to halt the meltdown. Perhaps they really are saving the big one for the day the market ultimately does crash.

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

10 Year Bond yields dipped to 3.58. Yields are in mid channel, retesting the lows. (Sound familiar). 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. The trend is still intact and we need to see confirmation of a turn from other indicators. Another spike lower can't be ruled out yet. The expected upturn in bond yields should correspond with the next 10-13 week cycle up phase in stocks. Money goes round in circles.

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 10/9/02
Dow Jokes Inflatables -215.22

Portfolio Sphincters Index-SPX -21.79

Nasgap -15.1

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.

It was another orderly grind down. The bears defensive line pushed back two surges by the bulls offense, sacking the quarterback twice, including at the end of the game. The 1 day cycle low came in at 12:30 and was retested in a perfect double bottom about an hour later. In the bad old days that would have been enough to set off a program stampede.

No more. They got a 1.3% move, and it was over within an hour. The averages closed near the lows. The 5 hour cycle low is still two hours away. We should see the obligatory bounce at the open, then sink into the 11:30- 1 PM slot. Unless there's a really big washout in the morning, look for another small up phase in the afternoon, and yet another late swoon. If they can sell them off hard, well into the range of the 10-13 week cycle cmaps, that should be the beginning of a short term low.

Barring a substantial move in the fucutures overnight, AM lows look like SPX 773, Nas 1105, and Dow 7260.

Dow Jokes Inflatables

The Dow continues tracking lower in the bottom half of its downtrend channel. The lower channel line is near 7150 Thursday, which is the upper line of the target box for the 10-13 week cycle cmap. The centerline will be at 7450. At this late stage of the cycle, a close above that line should indicate that the 10-13 week cycle low is in.

The 10-13 week cycle cmap range remains 6650-7150. The cycle indicator is signaling a potential bottoming phase. It will be confirmed only when both the signal line and smoother turn higher. The smoother is still declining. The low is due within the next 10 trading days.

It now appears that the 6-7 week cycle was bifurcated, with the last low in early September followed by an up phase lasting only 4 days, an 11 day down phase, and another similar sequence. The next low is due in approximately 5-10 trading days, with a cmap of 6900. The 4 week cycle has been suppressed, but its low should correspond with the projected 10-13 and 6-7 week lows.

The 13 day cycle cmap moved down to 6900 as well. That low is due within 4 days. While the bulk of the 10-13 week cycle down phase is complete, all signs are pointing to a final washout to 6900.

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 rose to 49.48, still trending near the center of the inverted scale 6 month cycle Stool Band. The trend is likely to continue until the lower Stool Band is penetrated. A 50 reading is no longer extreme, and is consistent with the trend.

Short Term Cycles

Here we are, finally touching the lower channel boundary. Normally Doc would expect a bounce at this point. However, at late stages of a persistent downtrend it is not unusual to see acceleration on the last spike down. If it happens, it is likely to lead to a sharp reversal. The lower channel boundary will be around 770 on Thursday. The center line is approximately 800. A close above that would confirm the turn.

The 6-7 week cycle phase is now clearly down, with only about a week to go and a cmap of 740. The 4 week cycle should run concurrent with that.

10-13 Week Cycle

Well, Glory Be! The 10-13 week cycle indicator (dark blue line, above) at long last stopped dropping. The indicator has a good record of upturns concurrent with lows. But it could be a false start, or it may need to back and fill for a few days. The 10-13 week low is due at any time within 10 days. Given the overall weakness and lack of a true panic washout, the most likely shape of the 10-13 week up phase is sideways, with a series of short sharp rallies and declines.That's speculation at this point. We still need to see confirmation of a low. This is still an open case and the cmaps are still out there at 700 to 760.

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 10/9/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/4 Mos.	680
10-13 Week	Down-Bottom/0-10	700-760
6-7 Week	Down/5-10	740
20-25 Days	Down/9-14	745
8,13 Day	Down/0-3	750-755

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 did the usual bump and grind, closing near cycle channel support levels. Short cycle cmaps remain way below current levels. Further downside acceleration is definitely possible. 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 with a cmap at 1020-1040, due next week.

10-13 Week Cycle

The 10-13 week cycle oscillator and 29 day rate of change are still in downtrends. The cmap is now 1010 to 1030, due within 10 days. If it starts to waterfall toward that level, the cycle low would be imminent. Tread carefully.

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 10/9/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/4 mos.	825-925
10-13 Week	Down-Bottom/0-10	1010-1030
6-7 Week	Down/3-8	1020-40
20-25 Days	Squished	Trending
8,13 Day	Down/0-3	1080-85

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

HUI is approaching the original correction target of 106, but cmaps have moved lower. Gold stocks are, after all, stocks, and they will trade with the stock market. When the stock market stages a recovery, the baby HUI's will outperform. The pain Doc warned about is here, and it ain't over yet. A couple of the shorter cycle cmaps are pointing to the 106-108 area, but the 13 week target is down around 103. As you can see on the chart, 105 is an area of major support, but be aware that prices often overextend at significant lows.

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

Buck took the pipe yesterday. Then he tanked again overnight, but made a "V" bottom and recovered to 107. We need to watch this intermediate up phase. If the 10-12 month cycle channel (red) begins to roll over, the stock market decline will get worse. On the other hand if Buck can base and stage a minor recovery from the 106.50-107 area, stocks should rally.

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

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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