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 Friday

12:30 PM Given the uncertainty of this situation, I have posted alternative paths for the PM action. Take your choice. Bad, or worse. Doc thinks bad will hold. Will keep you posted. 3 day cycle downside cmaps are just slightly below current levels. Should be some short covering there. Chart below. Follow Doc's intraday commentary and cycle charts on the hour and half hour during the trading day at the Stooltrading Beta Test.

9:15 AM Fucutures sold off overnight, then began to recover and now appear to be in a sideways down phase approaching the pre market close. The upside cmap is 885 on the fucutures. Overall the picture is mixed and basically flat.

Intraday Turdsday - The market gapped open, pulled back to retest the lows in mid morning, built a base for a few hours, then took off. Looks like we're finally off to the races on the up phase of the 8 day cycle which Doc has been expecting for the last two days. When the market extended its 1 day cycle up phase past 1:30 PM, that was the first sign that the swup was gaining strength. As of now, the 3 day cycle cmap is 892. There's no 8 day cmap yet. Look for a pullback in the morning into 5 hour- 1 day cycle lows between 10:30 and 12:00. The PM up phase will try to retest the highs and should fail if Doc's reading of the bigger picture is correct.

Pre Market Update at 9:15 AM.

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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

Turdsday's Markets

Feed Releases Turdsday- Stoolberg Looms 1/23/03

Let's reprise the MoGauge from Wednesday's Anals. Both mortgage purchase and refi applications were down last week, in spite of lower mortgage rates. While they remain at high levels, with defaults rising, mortgage volume must grow, or the bubble will die, and take the entire US financial system with it. For more on the credit bubble, see Doug Noland's Credit Bubble Bulletin, published every Friday.

Mortgage applications get funded about 4-8 weeks after the application is taken. When the GSE's hold those loans in their portfolios, they then turn into money through the magic of money market fund intermediation. Broad money supply grows, and that flows into the markets and economic activity. Likewise, when mortgage activity declines, money growth slows or even goes negative. In effect, the MoGauge has the potential of telling us to what degree money will be added to the system in a month or so. Big jumps in the MoGauge tend to be followed by big stock market rallies along with big jumps in money supply. When these bulges subside, the market follows a month or two later.

The slowdown in mortgage applications is showing up in broad money supply, in spite of the Fed's massive pumping the last few months. The November blowoff followed the applications blowoff in August and September.

Massive Feeding, which should be directly reflected in M1, hasn't been. Money is being destroyed by growing bad debt and the weak stock market. The credit bubble driven transaction economy, as reflected in M1, is dead in the water.

Loan growth has stalled. That's a bad sign, as defaults increase. Lenders are in the early stages of tightening credit standards. This will speed the collapse of the bubble.

C&I loans remain in a death spiral.

As does the non-financial commercial paper market.

We know that many of these borrowers have moved to the asset backed securities market as a source of funds. The question now becomes who will be willing to hold this paper as credit problems continue to mushroom. Uncle Buck's tankage will remove non-US investors. JP Mortem has too many problems to count.

This is the tip of the stoolberg. And we are headed straight for it.

Meanwhile, the market bounced today as the two-day overdue 8 and 13 day cycle up phase finally got going. If it isn't over already, the rally will last, at most, 1 to 5 days, and won't get too far. It's swimming against the 4 and 6-7 week cycles heading down, a couple of longer cycles topping out, and of course, the primary trend, still heading relentlessly down. The institutional nutcases are tapped out, foreign investors are getting the hell out, the perpetual motion credit liquidity pump is running dry, and Al is holding back the Feed for fear of triggering an inflationary meltdown in the bond market.

The liquidity just ain't there. The only cash available for stocks is whatever comes out of the stock market on the previous decline. That will only be enough to get it part way back on each rally. All of which is part of the topping out of the 10-13 week and the 1 year cycle. When that process is complete within the next few weeks, there won't be any more bounces.

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 billion in 28 day repos and $7.5 billion in overnight repos resulting in a net drain of $15.25 billion. $7.25 billion in 6 and 9 day repos, and $5 billion in 28 day repos expired. The $7.5 billion in overnight repos are the only expirations Friday. As suspected, the big Feed earlier this week was reversed, as it clearly a mechanism to grease the skids for the 4 week bill refunding auction. We're now back to where we started the week, with the Feed Index having reversed its 4 week moving average, and with total Feed back squarely in the middle of the 8% growth channel. November and December's massive Feed jam is history. Al is once again marking time, waiting to see how the markets, and economic data, respond to the recent pullback in Feeding. If the Feed Index were a stock chart, you'd swear it was a major top. Keep in mind that the only way to rescue the dollar and stop capital from flowing out of US markets is to tighten up, and raise short term interest rates. Not saying they will, but the drop in Uncle Buck has to have them worried.

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 has decisively broken its short term uptrend. Although the market managed to rally, the weakness in the Feedometer is bearish.

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 rose slightly. The short cycle is still heading lower, but overall indications remain mixed, pointing to a continuation of the trading rage.

Long Term View

Doc's Pooper Scooper.

Dow Inflatables- The Dow hit the 13 day cycle cmap of 8266 and bounced. The up phase should take the form of a swup, and last no more than 5 days. The 4 week cycle has a tentative preliminary cmap of 7950, due in 5-10 days. This is part of the topping out of the 10-13 week cycle.

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 above is in the bottom zone. The bounce began after the cmap of 875 was hit. The up phase should last from 1 to 5 days. There's no upside cmap yet. The 6-7 week cycle oscillator (chart below), declined. The 17 day rate of change is in a neutral holding pattern. The preliminary downside cmap on the 4-7 week cycles is 835. It will change in the days ahead.

10-13 Week Cycle

The 10-13 week cycle oscillator is moving down. The 29 day rate of change remains on the cusp of a sell signal. This cycle is still in a top. The down phase can last for up to 9 or 10 weeks, but the topping process could still eat up two or three weeks of that. Keep your seatbelts on. The initial preliminary cmap is 820, but expect that to change. Much depends on the size and shape of the current short cycle rally.

Sentiment

VIX declined and remains in neutral territory. It should take a number near 40 to signal an intermediate low.

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 1/23/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	??
6 Month	Down/2-11W	820p
10-13 Week	Top-Down/32-47	820p
4-7 Week*	Down/13-18	835p
8,13 Day	Up/1-5	??

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 1/23/03

Cycle	Phase/PTT	Target
10-12 Month	Top/0	1490 Done
6 Month	SWD/2-11W	1280p
10-13 Week	Top-Down/35-50	1280p
4-7 Week*	Down/6-20	1340p
8,13 Day	Up/1-5	??

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 1/22/03 PM

HUI and Gold remain in a sideways down phase for the 13 week cycle. A 6-7 week cycle low is due now and short cycle oscillators are turning up. The 13 day cycle cmap is 158 for HUI and 375 for gold. Gold has a 10-13 week cycle cmap of 380 and HUI has a 6 month cycle cmap of 175. The recent congestion areas may mark the midpoint of the move off the November lows. Because of the strong slope of the longer term cycles, shorter cycle down phases are only visible in their respective oscillators.

Charts as of 1/23/03 Close

Long Term View

Uncle Buck's Illness Comments1/24/03 6:30 AM

Uncle Buck took another dump breaking 100. The 10-13 week cycle cmap is pointing toward 97.25. He dipped as low as 99.55 overnight. A 6 month cycle sideways up phase is due now. Chart as of 1/23/03

Long Term View

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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