The Anals of Stock Proctology

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Doc does not make trading recommendations. This update reports time cycle estimates and centered moving average projections based on the Hurst cycle analysis method. 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?

PM Update 1/7/03 12:45 PM

Follow Doc's intraday cycle charts on the half hour. Click here for SPX and here for QQQ. This feature will become a part of the new Stooltrading service for daytraders, on a separate subscription basis when all the kinks are worked out. The regular Pre Market and mid-day updates will continue here as part of your subscription to the Anals.

Are we seeing a return of the normal intraday cycle. If the 5 hour cycle high should be forming as this is written at 12:45. Look for a 1 day cycle high around 2:30-3:30 PM NY time. The upside cmap on the 1 day cycle isn't clear yet, but looks to be no higher than 929.

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 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.

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

Pre Market Update 1/7/03 9:25 AM

Fucutures are in a weak 1 day cycle up phase with a cmap of 927. SPY's have turned up after being soft overnight. So far, not enough to revise the outlook posted last night.

Monday's Markets

Intraday - First it was straight up. Then for the rest of the day it was gradually up and up and up and up. It didn't seem as if there were cycles, but there were. The 1 day cycle wave touched the upper band of 3-5 day wave around 11:30. Because the 3-5 day wave was skewed so sharply higher, the down phase of the 1 day cycle kept rising until the final 15 minutes.

Friday's projected upside cmaps got blown out. This is normal in the initial up thrust of the 10-13 week cycle. Trying again for Tuesday, the 8 day cycle cmap on the hourly charts is 930. Been there done that. With the all day trending, there are no 5 hour or 1 day cmaps. Doc suspects that the late downtick was the end of the 1 day cycle down phase, and that the cycle will top out in later morning Tuesday. A trading range of 925-935 is his expectation for the first half of the day. Unless Europe coughs it up. We'll revisit at 9:15 AM ET.

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

Greatest Show On Earth 1/6/03

After seeing the results of Monday's action, Doc has to believe that the stage managers, in cahoots with their mental institution customers and co-conspirators, are prepared to take the market up through the December 2 high to convince the talking heads on Crapvision and the 46 people who still watch them, that yes Virginia, this really is a bull market. Doc can't wait to see the hysteria.

It will be the last hurrah. The Stage managers and the Gang of 22 will once again relieve their customers of their money, your money, your neighbor's money, your mother's money, and your brother-in-laws money, all the while thanking us "Suckers" profusely, as they ride off into the sunset.

Semantics, semantics. What it would or would not be called is irrelevant. What's relevant is where it's headed over the next 6 hours, 6 days, 6 weeks, and 6 months, not where it's been over the last 6 months, or what we call it. A bull market can, after all, only be recognized after it is well along. Then again, it depends on the time frame and the definition of bull market that you adhere to. Doc will therefore avoid meaningless semantic exercises, should we get to that point, and stick to the cycles.

For now, the 10-13 week cycle is clearly up. What isn't clear is how high that cycle will go. We may be able to project cmaps after another day or two. Another big up day, and we could be looking at a projection of 1000. That's a worst upside case form our perspective as bears. If the rally stalls and pulls back sharply over the next two-three days, means that the market will probably stay trapped in the 875-950 range as it traces out a sideways up phase.

Right now, we are staring at a centered moving average projection of 965 on the 6-7 week cycle. That's gonna wobble around a bit, but unless there's a drop right away, at least a minor break of the 12/2 high looks like a done deal in the next week or two. The fix is in.

There is a chance, however, slim, that the rest of the world will wake up tonight, and realize they had been presented with the golden calf, and instead of worshipping it, they will melt it down. If the rally halts in its tracks and falls apart as it races round the world, then the stage management of the market could be at an end. In that context, what happens to the fucutures, and US stock prices tonight in Asia and Europe, is of critical importance. If they buy tickets to the circus, then that's what we'll get for the next few weeks. There will be plenty of dung to be flung. If our overseas friends decide however, that they've been carnie barkered one time too many and elect to stay away, the Gang can pack their tents and move out. The show will be over.

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 a net of $3.5 billion in 3 day repos. There were no expirations. This followed an astounding $14 billion drain Friday. What's more astounding is the fact that the stock market kept zooming upward after the biggest 1 day drain since the enormous post 9/11 draining. You can see from the Feedometer chart that major vacuuming operations are always associated with declining markets. The Gang has to liquidate something, and stocks should be among the first to go. Not this time. Not yet, at least.

No expirations Tuesday.

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 that Al may now be targeting an 8% growth rate. Look at the 4 week moving average (brown line) and compare it with the slope of the tow larger channels for an indication for whether the slope of short term growth is slower or faster than the 2 longer term trends.

Monday's Feed does not negate the big drop from the top of the Feedometer's 6 month channel, but the recent uptrend is still intact. Did Al just want to make room for more juice later? The gigantic rally today means they should drain tomorrow. Maybe that will be enough to break this circus down.

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 (Snowmo Feedometer). A break above the orange trendline might indicate a more aggressive jamming policy.

Fed Turdsday Monetary Review

The bond market was down a bit, with yields slightly higher. The Gang of 22 continues to short heavily. Short cycles are heading up and the 10-13 week cycle has turned up, but hesitantly. The upside cmap on the 4-5 week cycle is 4.15-4.20.

Bond Yield Long Term View

Dow Inflatables- The initial thrust of the 10-13 week cycle up phase blew out short cycle cmaps on the Dow. The 13 day through 6-7 week cycles now appear to have a cmap of 8900. If it arrives there quickly and holds, then the 6-7 week cmap will move higher.

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 8-13 day cycle high should come within a day or two. The revised cmap of 935 has been hit. The 4 and 6-7 week cycles now range from 935 to 965. These cycles should peak between 3 and 11 days from now.

10-13 Week Cycle

The upturn on the 29 day rate of change strangely remains stalled and the cycle oscillator upturns are still less than impressive. This move is either still at the starting gate, or is going to abort early. The declining 6 month cycle, and topping process in the 10-12 month cycle should lead to the up phase taking the shape of a swup. It could last into mid February. Or it could end by next week

VIX

VIX declined. (Chart scale is inverted to show relationship with prices.) The indicator is at the top of a 6 month channel that has marked previous intermediate highs and lows. However, it may be on a trend path toward the low 20s. It's really no help here.

The 15 day rate of change is a proxy for the 4-7 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

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 1/3/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	??
6 Month	SWD/0-6W	??
10-13 Week	Up/4-29	Too early
6-7 Week*	Up/3-11	935-965
8,13 Day	Up/0-1	935

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.

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

Short cycles are headed up. The 8-13 day cycles should peak Tuesday or Wednesday. The revised cmap of 1425 has already been hit but they could blow through if the 10-13 week cycle picks up steam. The 4 and 6-7 week cycles' up phase could extend for up to 9 days. The cmap is 1465

10-13 Week Cycle

The 10-13 week cycle indicators are still not on a sure thing buy signal. They are either lagging, or the rally is going to suffer a sharp pullback. The Nasty has a habit of false starts and retests. At any rate, the up phase be a trading range, as the pressure of the declining 6 month and topping 10-12 month cycle keeps the lid on. Look for the high any time between next week and mid February.

Long Term View

Nasdaq Cycle Conditions as of 1/3/03

Cycle	Phase/PTT	Target
10-12 Month	Top/0	1490 Done
6 Month	SWD/0-6W	??
10-13 Week	Up/4-29	Too early
4-7 Week*	Up/0-9	1465
8,13 Day	Up/0-2	1425

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.

Long Bong Hit - See top of page.

AM Edition Features (Previous) These features are in morning edition, published between 7:30-8 AM ET US, or the Weak End Edition.

Golden Stool

Was that a reversal day? Could be. Gold is trading around $349 in the early morning action. Short cycle cmaps have been hit. The 13 week cycle still has a cmap of 355 to 363. While the 13 week cycle oscillator has topped out, the strength of the long term uptrend mans that the down phase should be no worse than sideways.

Although HUI should also be entering a sideways down phase, the 10-13 week cycle cmap indicates that a high of 168 is possible once the short cycles turn up again.

Long Term View

Uncle Buck's Illness

They jammed Uncle Buck overnight, but he sold off sharply between 6 and 8 AM and was trading at 102.39 at 8 AM. The 13 week cycle cmap is still from 100.75 to 101.50.

Long Term View

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

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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