The Anals of Stock Proctology

Don't be a stoolpid.
Read a book.

Join Ameritrade. Get 25
commission-free trades.

Home

The Anals of Stock Proctology

Golden Stool

Suctor Watch

Stoolwethers

Subscription Help

Stool Pigeons Wire - The message board Wall Street hates most

$ FEEDing Time

Ayyeee!! Whada you lookin at!

Index Charts

US Dollar

Long Term Charts

Old Stool Depository

Bear Essentials
Resources for bears

Alan Newman's Crosscurrents
Must reading!

Bill Fleckenstein

Bear Market Central

Beartopia Terrific resource!

Comstock Partners

ContraryInvestor

Credit Bubble Bulletin

Marketviews

Prudentbear.com
Read the economic
case for the bear.
Home of the Prudent
Bear mutual funds

Tim Wood- Cycles

Humor

Wall Street Follies Financial Funnies Hilarious! by stoolie prolerbear

Not In My Backyard
The creative genius of stoolie wienerdog.

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

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.

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.

Intraday Updates 2/18/03

12:45 PM Today's action could be distorted by illiquidity since most NY market makers may be absent from their trading desks. $15 billion Feed also related. Near1 PM market is approaching 3 day cmaps and second 5 hour cycle cmaps. If they fail to extend from here remainder of afternoon could be down, with 1 day low due at 3 PM. 8 day cycle cmap also 853. Chart below.

Get regular updates throughout the day in Stooltrading.

9:25 AM The 1 day cycle cmap based on the fucutures is 840. That should top out the 3 day cycle as well. The high is expected on the open, based on the 5 hour cycle, with a 1 day cycle reaction high or retest around 11 AM.

Intraday Friday - Friday was the 6-7 week cycle up phase lift off day. Whether there will be follow through isn't clear yet. Indicators are not all in gear. The morning was the noise driven Blix blitz. A big selloff followed into a five hour cycle low at 12:00. With the earlier high at 11:00, another 5 hour high was due at the bell. That up phase turned into sheer panic. The 3 and 8 day cycle are up, with cmaps just above Friday's close. Whether the 5 hour cycle high is the end of it, or it extends into 11 AM Tuesday is anyone's guess. The fact that US markets are closed Monday means that the rest of the world makes the rules for what happens Tuesday. The degree of panic on Friday afternoon suggests to me that the move will be immediately reversed, but in the immortal words of professor of Elliott Professor Emeritus of Stock Proctology, Simple Guy, "I could be wrong." Heh heh.

Pre Market Update at 9:15 AM NY time.

Get StoolieSignal Special offer here only!

The cycle map below is en estimate of how the market might behave over the next few hours. Should the pattern be broken, the map should be redrawn to fit the actual. Cmaps and times shown are guidelines only. Cycles vary in wavelength and amplitude. Directional changes within an hour of the expected turn and a few points of the cmap should be respected. The indicators rule. Times and prices are the projected cycle highs and lows with cmaps.

5-8 Day Cycle______ 2-3 Day Cycle_______ 5 Hr-1 Day Cycle

Friday's Markets

Momma Said There'd Be Days Like This 2/15/03

First, Doc wants to say that he doesn't know how high this rally will go. It could gap down on Tuesday, and never see Friday's high again, or it could push a little higher. It's way too early to project, and throwing numbers around is just wild guessing. There is short term channel resistance at 840. 13 day cycle cmaps are also around 840, but none of this should matter.

Doc saw a tremendous amount of gnashing of teeth on the message board since Friday afternoon. That's because people are trying to game the tape too much. The fact is that this "game" requires very little thought about gaming. That's what indicators are for. We need to let them do the thinking for us.

In terms of the swing trading cycles, Doc follows nominal cycles of 10-13 weeks, 6-7 weeks, 4 weeks and 8 or 13 days. He has constructed an indicator or two for each cycle by plugging in the appropriate period to a variety of price momentum or differential indicators. The period is based, on half the time span and/or the full time span of the cycle involved.

It is a very simple matter to choose a cycle you want to trade and follow the indicators for that cycle. It is a good idea to trade only in the direction of the next two larger cycles. If you are going both ways you are gaming the tape too much. You will screw yourself into the ground unless you are an extremely experienced, able and adept trader, with lightning reflexes. Outside of stoolies K Wave Rider, Brian 4 and a few others, not many of us are in that class. The rest of us should be out of the market when our trading cycle is not in the direction of the next two longer cycles. For example, if I am trading the 6-7 week cycle, I want to get short when the indicator initially turns down, and both the 10-13 week cycles are toppy or heading down.

I stick with the SPY or QQQ, because I have limited capital. I like the SPY because it is less volatile and more predictable. If you have enough capital to trade a basket of stocks, I like stoolie PileDriver's strategy of shorting the dogs using a good screener. He talks about his strategy and methods on the Stool Pigeons Wire frequently. Do a search on the board for threads he has started if you want to learn more. Good stuff, Doc thinks.

Doc likes to trade the 10-13 week cycle. That's where we see the really big moves. He wants to be short when there are clear signs of a top in that cycle, and the 6 month and 10-12 month cycles are either also indicating a top or are heading down. We saw that happening in the second week in January.

Right now we have a situation where the 6-7 week cycle is turning up. What do we do? If we are trading the 10-13 week cycle, the answer is, "nothing." If we are trading the 6-7 week cycle, when the downside cmap was hit on Turdsday, and the market started to turn, that was a signal to take profits. With longer waves still headed down however, the rally is likely to be short lived. 10-13 week cycle players are doing nothing until there are clear signs of a turn on the oscillators for that cycle. 6-7 week players who followed the oscillator turns in January are sitting on hefty profits. They can get out and relax for awhile, or they can elect to wait out the 10-13 week cycle indicators. When they turn up, it's time to take your shorts off.

If you ran after the moving train after it left the station, you have a dilemma. The time to board is when the thing is sitting in the station. Take your time find a good seat, sip your coffee, and read the paper. If you ran down the track chasing the thing, and managed to jump on as it was picking up speed, now is the time to think about preserving capital, so that you can buy a ticket for the next departure. Decide which cycle you want to trade, and follow the signals for that cycle. If you feel that you are on the wrong train, get off now, and get the right one next time. You don't have to predict when the train will come and what track it will be on. Just sit in the station and wait till it arrives. The indicators will tell you when to get on.

Correction- Doc had one of the green arrows in the wrong place yesterday, which probably confused the hell out of everyone. Here is the corrected chart showing the current and previous 6-7 week cycle lows at similar positions in the 10-13 week cycle. The forward projections now look a little too aggressive with the 10-13 week cmap at only 770-790. We'd need to see a big down day next week to validate the projections shown below. Otherwise look for a shallower decline and trough. Doc will update this after a couple days of action next week.

Doc's Pooper Scooper.

Be a Johnny Applestool! Help spread the Stool! Feel free to repost snippets from the Anals on message boards around the web. Just give a link back! Many tanks - Doc

The Feed added $2 Billion in 4 day repos. There were no expirations. This round of repos will expire Tuesday when the market reopens. There are no expirations Wednesday. Then Turdsday $9.5 billion in 7 and 8 day repos will expire, along with the usual 28 day repos in the amount of $4 billion.

This looks like the beginning of a turn up in the Feed Index. Al may be preparing for war, and the overwhelming demand for plastic wrap and duct tape. Or maybe just the 3 day holiday weekend and President's day sales.

No kidding!

If this crisis deepens he will open the floodgates. The market would respond within a week or two. We need to be wary of the potential for another liquefaction like the one in September 2001. It will turn the market and trigger another one of those patented bear market rallies we have all grown to hate so much. However, anything that stays within the blue channel will have little effect.

Two 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. The blue channel going back to last December suggests a 5% growth rate. Look at the 4 week moving average (brown line) and compare it with the slope of the two larger channels for an indication for whether the slope of short term growth is slower or faster than the 2 longer term trends.

The Feedometer is primed for a reversal but they'd have to take it up though the gold channel lines to really move the market. Anything less won't matter much. In the end, the money can be there, but the Gang of 22 will put it where it sees the greatest opportunity, or sometimes, just safety. A really big Feed to the upside is likely to piss off the big bond guys like Pimco. And that would not be a good thing for the Credit Bubble economy.

The Feedometer theoretically measures excess Feed available for bond or stock market jamming. Al selects a trend level he feels is needed to reflatulate the economy. The Feedometer measures the difference between the apparent trend target, and actual day to day Feeding (Fastow Feedometer), as well as a four week moving average (Slowmo Feedometer). A break above the orange trendline might indicate a more aggressive jamming policy.

10 Year Bond yields rose sharply Friday. The daily chart illustrates the multiple cycle juxtaposition that is keeping yields in a narrow range. There's no sign yet of an end to that.

Long Term

Long term downside cmaps were met in October, finishing off a gigantic blowoff. That was the end of the secular bull market in bonds. The last 5 months have been a period of major distribution. That will continue for the foreseeable future.

Dow Inflatables- The initial upside cmap for the 13 day cycle is 7990. The 6-7 week cycle has turned up but it's too early to project a target. The 10-13 week cycle downside cmap rose to 7500, but that's not the final word on that either.

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.

Portfolio Sphincters Index (SPX) and Sentiment

Cycle Chart
The red channel is the idealized 18 month-2 year cycle. Dark blue is the 10-12, or 6 month cycle. Teal is the 10-13 week cycle.

Short Term Cycles

The short cycle oscillator rose again. The 6-7 week cycle has entered an up phase, which Doc expects to be a swup. Look for some wild swings in the next week or two.

The 6-7 week cycle oscillator on the chart below upticked again. The action is similar to late June and late September. This is the beginning of a divergence that will lead the final low of the 10-13 week cycle. The 17 day rate of change (chart below) turned, but again, a 10-13 week cycle bottom is usually preceded by a positive divergence. This is a preliminary bounce.

10-13 Week Cycle

Roughly 4 to 7 weeks should remain in the 10-13 week cycle down phase, unless a six month cycle low intervenes. (See Long Term, below) The cycle oscillators upticked but are still in a downtrend. The one in the top chart is in the bottom zone, but it can bounce around down there for weeks while the market trends lower. The 29 day rate of change is still downtrending. There will be no substantial rally until all of these indicators turn up in concert. Now, if that should happen in the next day or two, I would not sit there and just shake my head saying, No! No! Follow the indicators. Ignoring them is asking for trouble. If they're wrong, or if they whipsaw, sit in the station and wait for the next train. We've already taken a big chunk out of this one since the downturn in mid January. Now is the time to be ready to realize that. We pull the trigger when the indicators turn.

The preliminary cmap for this cycle continues to oscillate, now pointing to 770-790. That means that unless there's a big down day in the next week, the remainder of this cycle down phase is going to be a shallow trough.

Sentiment

VIX fell. (up on the inverted scale chart). In the context of the current cycle, the reading is neutral. The next significant intermediate cycle low should reach at least 50-60.

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.

Long Term View

Linear Regression Analysis- The rally off the July-October lows was the first to fail to reach the upper regression projections within 4 months of breaking the lower channel in the bear market. The 1 year regression is sloping down more sharply than at any time throughout this bear. Using METASTOCK, Doc took the 12 month regression channel with the time span fixed at one year, and moved it across the entire chart. In no prior 12 month period was the down slope as sharp as it is now. Having failed to break this 1 year regression channel, the market is about to enter a period of extended and accelerated decline. The last line of defense was the long term central regression projection. The lower blue projection line has been a congestion area since July, shport on the way down and resistance on the way up.

Long term cycle configurations are shown on the chart below. Keep in mind that 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.

The 4 year cycle low was between the April and September 2001 lows. The 4 year cycle actual price high was in January 2002. The rally from the September lows to the final high in March 2002 was, in essence, a 4 year cycle bull market within a long term secular bear market. As opposed to the price high, the wave high is where the upper edgeband of the wave envelope contacts the upper band of the next longer wave. That was from last November, when speculative fever was at its peak through early January, when we saw a second wave of speculative frenzy. The degree of speculative mania during the 3 month trading range in the fourth quarter of 2002 was consistent with a major 4 year cycle top. Cats, dogs, and pigs could fly. They have since started falling back to earth, and will continue until they are all 6 feet under.

The July-October double bottom was a nominal 18 month cycle low. The 18 month cycle wave high is ideally due around mid-year but the price high was in December at 940. The wave high looks like it was in early January, again coinciding with the wave of speculative mania. For 2003, the low will probably be near 600- 650 late in the third quarter or early in the fourth. That would be followed by a tepid year end rally of 10% or so. The 18 month and 4 year cycles should be in gear to the downside through at least the first half of 2004. At the current secular trend rate of decline, the mid year 2004 low extrapolates to between 585 and 676. In the event of a panic low an extreme of 525 is possible.

Currently the 10-12 month cycle is completing a top. The 6 month cycle is heading down. The low may be imminent or it could extend into late March. The cycle should have resynchronized off the October 18 month cycle low. If it did, the low is ideally due in March but it could easily be month either way. Cycle lengths of 5-7 months are common. This is where it gets tricky. It the 6 month cycle oscillator turns up expect a rally or at least lots of churning as the cycle swups across the 18 month cycle. The downturn in the 12 month cycle down will limit any upside on the next 6 month cycle up phase. But there will be huge swings within the channel.

The third quarter of 2003 looks like a period with a high probability of extended decline.

The index has moved to the bottom of the 18 month channel. The current 13 week cycle down phase is expected to last well into March or early April but the downside could be limited. The remainder of the down phase should be shallow. After one or more weak rallies following "successful retests" of the lows, there will be another 20% killer wave down in the second half of 2003.

Check out the symmetry of the bubble's inflation and deflation.

(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 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 2/14/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/3-5 M	700
6 Month	Down/0-6W	740
10-13 Week	Top-Down/20-35	770-790
4-7 Week*	SWU/6-11	??
8,13 Day	Up/0-4	835-40

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 usually overlap. The dominant cycle is reported.

Suctor Watch and Stoolwethers- Updated each morning between 8 AM and 9:00 AM NY time.

Nasgap Charts

The Nas is expected to behave more like the SPX with the continued de-weighting of tech. In the interest of publishing the Anals earlier in the evening Doc is presenting the charts and data without commentary, as it is largely redundant relative to the SPX commentary above.

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.

Nas Long Term View will be posted Sunday.

Nasdaq Cycle Conditions as of 2/14/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/3-5M	950p
6 Month	Down/0-6W	1100
10-13 Week	Top-Down/20-35	1150-1200
4-7 Week*	SWU/6-11	??
8,13 Day	Up/0-4	1340

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
* The 4 and 6-7 week cycles appear to have merged into one.

Suctor Watch and Stoolwethers- Updated each morning between 8 AM and 9:00 AM NY time.

Long Bong Hit - See top of page.

Golden Stool 2/15/03 PM

Gold took another dive Friday. the fallout from the increase in margin requirements continues. Short cycle cmaps are pointing to the 349 area on a closing basis. Long term upside cmaps have come down, now at only 375 385. The 9 month cycle oscillator looks like a top. Short cycle lows are due any day this week or next. Doc is expecting a pretty good snapback, but it will probably be part of a new trading range of 345-385, lasting months, or longer. The next major leg up could be a long way off. .

Charts as of 2/14/03 Close

HUI did the down yoyo thing and could crack Monday's lows by a bit. The 4 month (or 13 week, take your pick) cycle has been in a sideways down phase for 6 weeks. The bottom is due any day now as are short cycle lows. Cmaps are now generally 125-133. The 10-12 month cycle oscillator is still rising but a top is due and upside cmaps have dropped to levels already hit. This also suggests months of consolidation ahead in the 125 to 150 range.

HUI Cycle Conditions as of 2/14/03

Cycle	Phase/PTT	Target
9-12 Month	Top/0	155
4 Month	SWD-Bottom/0	125-133
4-7 Week	SWD-Bottom/0-13	127-133
8,13 Day	Bottom/??	128-130

Uncle Buck's Illness

Uncle Buck bounced back as his 13 week cycle up phase continued. Short cycle upside cmaps are now around 100.50. This also looks like it may be a six month cycle low but I'm nor sure about that. For now, I've drawn the chart that way. I'm leaning in that direction. Buck may stabilize in a range of 99 to 101.50 for several months, but longer term cmaps are as low as 88-90 looking toward 2004.

Chart as of 2/14/03 close

Uncle B and SPX (gray line on chart) usually move together because Uncle Buck's index measures the flow of capital into and out of US paper assets. The relative magnitude of the moves varies and wide divergences are followed by convergence. Central banks intervening to buy dollars are not going to help stock prices, and cannot drive sustainable advances in the dollar.

Get StoolieSignal Special offer here only!

Suctor Watch and Stoolwethers- Now posted on separate page. Updated each morning between 8 AM and 9:00 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

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!

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
sto: stochastic
swup: sideways up phase
swdp: sideways down phase