The Anals of Stock Proctology

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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.

Doc welcomes the many new junior stock proctologists who have joined the American Society of Shortsellers in the past week. If you are not an experienced chartist or trader, ok, even if you are, you may find the Anals just a bit confusing for a little while. But Fear Not! You will get it after a few days, at most a couple of weeks. Questions can always be posted on the Stool Pigeons Wire message boards, where Doc and/or your fellow stoolies will respond. Explanations of abbreviations and terms are at the bottom of the page. The complete list of links to the entire archive is in the left column menu. Now it's time to sit back, relax, and enjoy the show.

Many tanks!

Doc

Intraday Updates 1/29/03

1:00 PM Who said there's no PPT? Who said the market isn't rigged? That little buy program changed the direction of the 8 day cycle channel from down to flat. We are still in that swup. It was exciting, but doesn't change anything....yet. Looking for top of 1 day cycle around 2:30 at cmaps shown on chart below. The 1 day cycle high could come at the close, with a retest. If the 65 hour cycle is dominant, no retest. 3-8 day cycles still in swup.

9:15 AM Fucutures are rallying heading into the opening bell, after a selloff overnight. The upside cmap on the 1 day cycle is 851 on the SPX. The next 1 day cycle low is due around 12:00. There's a lot of noise in the mix today. We'll need to wait until that settles out, probably after the Fed meeting. Usually there's some short covering, then a flat period in the last couple of hours before the meeting announcement at 2:15. Follow Doc's intraday commentary and cycle charts on the hour and half hour during the trading day at the Stooltrading Beta Test.

Intraday Tuesday - The market came out of the gate strong, as the swup which began mid-day on Monday continued, gaining strength in the PM. We saw a 1 day cycle high at the open, lows at 11:00 and 1:00 and then a drift higher into what should be a 1 day cycle high at the bell, with a second high likely at or soon after the open tomorrow. Could see a little blowoff first if they like the speech, or straight down if not. Either way, the top of the 3 day cycle swup should come in the morning. The cmap remains 860 on the SPX. (Chart below.)

Pre Market Update at 9:15 AM NY time.

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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

Absolute Power Corrupts, And Also Turns On Itself 1/28/03

Now it's President Hoover's turn. Doc began calling him that in these pages the day after he lost the election and became President. Not the first time a loser became President, that's for sure. I mean, you'd have to be one to even want the job. Fortunately in this country we have a whole bunch of losers who want to be President. Or at least who want to give the loser who's President, a hard time. We call these people Senators and Congressmen. We are fortunate because the other losers give the chief loser such a hard time, that not too much gets done. The loser in charge can't do too much damage with his addle brained big ideas, like giving ever greater tax cuts while a bloated budget soars out of control. It used to be tax and spend. Now it's, cut taxes, borrow and spend. Who cares if the next generation won't be able to pay it back? It'll be the Democrats problem anyway.

The guys who can really do a lot of damage are the ones whose power is unchecked, who do not have to suffer the slings and arrows of our system of losers, checks and balances. The particular guy I have in mind is the one in charge of the checks and balances in our pyramid scheme economy. Now who might that be?

We all know that power corrupts, and absolute power corrupts absolutely. The Chairman of the Feed, also known as the Director of the FBI (Financial Bubble Inc.) is as close as we come in our system to absolute power. Unfortunately the guy in charge of our bubble is a mush-mouthed, megalomaniac tinkerer who has tinkered us into an unsolvable dilemma.

Look at the mess we are in. Al has used his power through the years to promote and sustain a credit bubble to the point that it has now become a monster with a mind of its own. The bubble monster is still boiling in some areas, but slowly and surely deflating in others. The mad scientist in charge has gone from all powerful to pathetically powerless. If he tries to reflate, the dollar tanks and the bond market will soon follow. When he pulls back on the gas pump the stock market goes in the tank and consumers pull in their horns, bringing the teetering economy to the brink of collapse.

Power corrupts, and absolute power corrupts absolutely. Over time it corrupts not only those in power but the system as a whole, so that it no longer works. It shrivels up and dies, or comes apart at the seams. That's where we stand. The exercise of power in our financial system no longer works. It can't even be exercised. Its long term misuse has brought about endemic, intractable, unintended consequences, and none of them are good.

Unless you are short stocks, long gold, and very, very patient.

Fed Releases Turdsday

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 $5 billion in 9 day repos and $3.75 billion in overnight repos resulting in a net addition of $2 billion, on the expiration of $6.75 billion in overnight repos. The $3.75 billion in overnight repos are the only expiration scheduled for Tuesday.

The addition of the 9 day repos should not be a surprise. It was Al's insurance against a meltdown in advance of President Hoover's SOU speech to night, in which he will call for a tax cut in every pot, primarily for the people who need them the least. Obviously he wants the stock market to go up, since public opinion polls go in the same direction as the market, and he would like to actually be elected president before he goes out of office. Al will give him as much help as he can, since Al's legacy depends on the market not melting down any more than it already has. He is already the Fed chairman who presided over the biggest bubble and longest bear market in history.

Whatever Al does won't matter. Foreigners hold the keys, and they are holding their noses too. Not only will they repatriate, but US investors will look increasingly overseas for yield and opportunity. Good bye Uncle Buck. Good bye Mr. Market. The more Al feeds, the worse it will get. He knows that. And that is why we have seen the recent pullback in Feed. Al wants the Buck to stop here. It won't.

The Feed Index is now unchanged over the last two months. Will we see even more reigning in in the weeks ahead? Stay tuned.

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 is still in a short term downtrend. It's no coincidence that stocks have been sick. They cannot survive without a rising Feedometer. And there's probably no chance of sustained excess Feed because of its destabilizing effects on Uncle Buck, and potentially the Treasury Bond market.

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 and remain nailed to a range with most indicators stuck near neutral. Short cycles are bottoming after hitting the cmap of 3.85. Yields hit long term downside cmaps in October. The trading range is part of a long term bottom in yields as capital begins to flow out of U.S. paper assets.

Long Term

Dow Inflatables- Last night we saw the first 10-13 week cycle low projection. Despite the rally, there's no change. It remains pointed toward 7435 for now. Tonight's chart focuses on the 4-5 week cycle. The low is due within a week at a cmap of 7886. Below that and a couple weeks beyond is a 6-7 week cmap at 7750. Both could and should still change as the low is approached.

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 began to turn up in the bottom zone. Normally, the first such turn results in a one or two day bounce, then the market heads lower again while the indicator diverges, leading to a bigger rally on the second upturn. In those rare scenarios that our Elliot Waving friends refer to the 3 of the 3 of the 3, or something like that, the indicator will just stay down for awhile, or it will correct upward while prices march lower at an imperceptibly slower rate for a week or two. Then it gets worse.

The 13 day cycle has turned up. This should be a short sideways up phase that could end as soon as Wednesday. The 4 and 6-7 week cycles continue lower. A low is due on the 4 week cycle in a few days, but that should be irrelevant as the 6-7 week cycle has been dominant lately. The 17 day rate of change is completing a top and starting to break down. The downside cmap on the 4-7 week cycles is now 830. That could still drop in the days ahead.

10-13 Week Cycle

The 10-13 week cycle oscillators are heading down. The 29 day rate of change is slowly turning lower but isn't in panic mode. The market could trend like this for weeks. The down phase may last 6 to 9 weeks. The preliminary cmap is 820, but expect that to go lower. Because it is so early in the 10-13 week cycle there are still plenty of dip jerks out there, so the next few weeks of the down phase are likely to be choppy, with a series of short rallies and declines that should establishes a pattern of lower highs and lows. The decline should accelerate in the last few weeks of the cycle, probably around mid February into mid to late March.

Sentiment

VIX fell sharply (up on the inverted scale chart). Normally we'd look for a bounce if it goes to 40 or above. It's there. This will be an interim low because over the next few weeks the channels will turn lower. There is no way to know what level will be reached at the final low of this cycle. It should be at least 50-60, and possibly much higher in a worst case scenario. We use this as a confirming indicator only, and will rely, as always, on price indicators as the final arbiters.

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 1/28/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7 M	750p
6 Month	Down/1-10W	725p
10-13 Week	Top-Down/29-44	820p
4-7 Week*	Down/0-14	830
8,13 Day	SWU/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 1/28/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/5-7M	1000p
6 Month	SWD/1-10W	1180p
10-13 Week	Top-Down/32-47	1280p
4-7 Week*	Down/3-17	1280-1295
8,13 Day	SWU/0-2	1295

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- Now posted on separate page. Updated each morning between 8 AM and 9:00 AM NY time.

Long Bong Hit - See top of page.

Golden Stool Comments 1/28/03 PM

Gold rose again, while Cousin HUI continued to market time. HUI remains in a 10-13 week cycle sideways down phase which should end within a few days. It looks to Doc like the up phase is imminent and could be powerful, but until the breakout, we can't be sure. Gold is hitting a revised upside 10-13 week cmap of 371 but its 6 month cycle cmap is 390-95 and the 1 year cycle cmap is 400. HUI has a 6 month cycle cmap of 180-85. Although they are subject to short violent pullbacks in their ongoing uptrends, Doc does not yet see the signs that this double top in the HUI will mark an important top.
Charts as of 1/27/03 Close

Long Term

Uncle Buck's Illness Comments1/28/03 PM

Uncle Buck remained stable Tuesday. Short cycle cmaps still point to around 98.50, which he almost hit, and the 10-13 week cycle cmap rose to 97.50. The cmap has dropped to 93.50 on the 6 month cycle low. A 1 year cycle low isn't due until mid year. If the buck stops here, it won't be for long. Chart as of 1/28/03 close

Long term

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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