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?

Intraday Updates 1/15/03

12:30 PM We are now in the window for the 5 hour cycle low. Oscillators are still flatlining. There will be no bounce of significance until they come out above the 20% horizontal. Until then, it's trending in this cycle time frame, as the 3-8 day cycles head down. The 3 day cycle cmap is now 912. 26.55 on QQQ. Chart Below.

9:15 AM Fucutures are strong as we head into the NY open. Based on the pre market action, Doc will stick with the cmap of 932.50 he posted last night. The expected time is 10:30. Always allow an hour leeway either way. Looking for 27.37 on the QQQ in the same time frame.

Intraday Tuesday - It was a horribly quiet day between the goal lines, until the last two minutes in anticipation of the Tell after the bell.

The cycle picture remains very mixed. Until either the 1 day or 5 hour cycle emerges it will be nearly impossible to project the timing of intraday highs and lows. Cmaps are less of a problem. For now, we have to assume, for lack of other evidence, that the flat trading range will continue. It will change when it changes. We will be there to recognize that change as soon as it's possible to do so. We'll start by expecting a little strength on the open and an early 1 day cycle high. Pre Market Update at 9:15 AM. Follow Doc's intraday commentary and cycle charts on the hour and half hour during the trading day at the Stooltrading Beta Test.

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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

Tuesday's Markets

Two Minute Drill - 1/14/03

The pregame show was fun with the retail sales data knocking the boys for a loop. But alas, news is still noise, and the 10-13 week cycle dippers are still in a buying mood. The game itself was stultifying until the last two minutes. Bulls ran a two minute drill to drive for the score on speculation that they would score again on the Tell in overtime. As usual, the "news" was spun as good, and the Tell was bought in the overtime. It closed in the aftermarket near the high of the session.

Centered moving average projections for shorter cycles are coalescing just above current levels on the averages, and the 6-7 week cycle is due to top out now. In strongly trended markets the 13 week cycle is dominant, but historically, in flat markets the 6-7 week cycle is most apparent. Doc cut his teeth in the markets of the late sixties and early seventies, and first read Hurst in 1970. In his early years of doing cycle work, Doc didn't even know about the 13 week cycle. The Dow seemed to run on a 33-34 day cycle like clockwork through the early eighties.

In flat markets, where there is no thrust from longer cycles, shorter waves begin to dominate. If you look back beginning with the July lows, you will see that the 6-7 week cycle has been regular as clockwork. It may be that it is becoming as important as the 10-13 week cycle. Keep an eye on the short cycle oscillators, the 17 day rate of change, and the 6-7 week cycle oscillators. They are likely to confirm the final high well before the 10-13 week cycle oscillators turn down.

We may need to focus on shorter term indicators for another reason. Be prepared to stay stuck in this trading range for another month or more. It could happen. Even if the 6-7 week cycle turns down, the 10-13 week cycle jerks may do enough buying to keep the market bumping against the ceiling for another month. It's likely to be quite choppy. Then, when the 10-13 week cycle turns down, the 6-7 week cycle upturn could keep things suspended for 2-3 weeks more. Over the next month or two, we could be seeing a lot of the 13 day and 8 day cycles. No big waves, but lots of small choppy ones. To play them, you'll need to zoom in on shorter cycles.

Naturally, it doesn't have to play out that way. The 10-13 could die early, and we could start the long march down immediately. If the indicators for the various cycles get juxtaposed, be prepared to do a lot of scalping and short swing trades. When and if they do get in gear, that will be the time to back up the wagon and load your shorts.

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 $4.25 billion in 9 day repos while $3 billion in overnight repos expired for a net add of $1.25 billion. There are no expirations Wednesday.

Al was apparently spooked by the retail sales news. While the net addition was not especially large, it will stick around for nine days. Other than the 28 day repos refunding due Turdsday, there are no other expirations scheduled this week.

The 4 week moving average of total Feed has turned down. That usually means they will pump less for a few weeks. If bond yields downtick it will give them leeway to start pumping more. They didn't drop much on the week economic data. Al won't get truly aggressive until stock prices dive. That's the tail that wags the dog's Al.

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 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.

The Feedometer's recent uptrend has been broken and the Slowmo Feedo has turned down. Maniacal pumping was sufficient only to keep the market in a range. Less Feeding should be bearish, but they will probably pump just enough to prevent a rapid meltdown. It all depends on how much leeway the bond market gives them.

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.

Bond yields declined a bit. The short cycle oscillator has hit a top zone. The 13 week cycle is in a weak up phase, while longer cycles are juxtaposed. Short term cmaps have dropped top around 4.20, a level that was already hit. A 13 day cycle low is due in 3 days. Interestingly, the Gang is still borrowing quite a lot of bonds to short.

Bond Yields-Long Term View

Fed Turdsday Monetary Review

Dow Inflatables- The Dow pushed toward its 13 day cycle cmap of 8860 on the Tell speculation in the last few minutes of trading. The 6-7 week cycle cmap remains 8900. The oscillator for that cycle is giving early warning of a top. It's day to day, now.

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

In spite of the gain, the 8-13 day cycles remain in a sideways down phase which could last 3 more days. The 6-7 week cycle should peak within 4 days. The cmaps have narrowed to 945. The short cycle oscillator looks toppy. The 6-7 week cycle oscillator continues to point upwards.

10-13 Week Cycle

The cycle oscillators continue to move weakly higher. The 29 day rate of change remains in neutral. If the 29 day ROC continues to flat line a severe down phase may follow. Keep an eye on that.

Doc still cannot make a projection of the cmap for the high. This up phase could peak at any time but there is a risk that it might last for as long as six weeks. Much depends on what happens in the next few days. If the 6-7 week cycle turns and comes down hard, then the 10-13 week cycle should die an early death. If the 6-7 week cycle down phase is shallow, then we could go on drifting sideways for weeks on end. It's possible that this trading range could last until the end of February. Ugh.

We'll simply have to wait for the indicators to tell us.

Sentiment

VIX was up again. (Chart scale is inverted to show relationship with prices.) The indicator is extended at the top of a 6 month channel that has marked previous intermediate highs and lows. Normally after 3 days of extension, the market begins to roll over.

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 1/14/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	??
6 Month	SWD/0-4W	??
10-13 Week	SWU/0-30	??
4-7 Week*	Up-Top/0-4	945
8,13 Day	SWD/0-2	???

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

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.

Long Term View

Nasdaq Cycle Conditions as of 1/13/03

Cycle	Phase/PTT	Target
10-12 Month	Top/0	1490 Done
6 Month	SWD/0-5W	??
10-13 Week	SWU/0-20	??
4-7 Week*	Up-Top/0-4	1465
8,13 Day	SWD/0-4	??

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.

Golden Stool Comments 1/14/03

Gold and HUI took a dip. The 4 week cycle now has a downside cmap of 137 on HUI. The low is due within 4 days. The 13 week cycle remains in a sideways down phase. It should end by the end of the month. There's no sign of a meaningful pullback in the pog yet. Today was scary in the gold stocks, but the correction should be short lived, and shallow.

Charts as of 1/14/03 Close

Uncle Buck's Illness Comments1/15/03 7:30 AM. Updated in AM edition

Uncle Buck was traded down to 101 Tuesday, then got ramped overnight to 101.70. He was starting to back off that, to 101.50 at 6:45 AM NY time. The 10-13 week cycle cmap has dropped to 98.50-99. The cmap on the13 day cycle is around 100 due within 4 trading days. Although a 6 month cycle sideways up phase is due, the 1 year cycle is heading lower. Doc expects to see the mid 90's by the third quarter. Chart as of 1/14/03

The 1 year cycle cmap is 94.50 due late in the second or early in the third quarter.

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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.

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