The Anals of Stock Proctology

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.

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?

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

Mid Day Update (11/13/02) 1 PM

The early selloff was extra-cyclical, and looks like an attempt to clear out stops by the stage managers in preparation for a run up. We had expected the 5 hour high between 11:30 and 1 PM, and the 1 day high around 2:30. The cmap for that high is 895 to 898. The 5 day cycle cmap is still no higher than that. If they turn down before 2:30, the 3-5-8 day cycles are weak, and shouldn't make additional upside progress. The 5 hour cycle ozzie is beginning to roll over as this is being written. If the 1 day cycle high is lower than the 5 hour high, look for significant weakness going into the close. I may look something like this.

5-8 Day Cycle______ 3 Day Cycle_______ 9-13 Hr Cycle_______ 5 Hr- 1 Day Cycle

Pre Market Update (11/13/02) 9:10 AM

Doc's intraday outlook posted last night is looking bass ackwards based on this morning's action in the fucutures. The overnight up phase was puny, and the 5 hour all sessions futures cycle appears ready to head down. Bu they still haven't broken below 880, so Doc will stick with the original forecast for now. Odds are it will at least be a little flatter than drawn. Will comment on Intraday Stool as needed, with mid day update here between 12:30 and 1 PM ET.

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 to Capitalstool.com! Many tanks - Doc

Doc Won't Be Long (11/12/02)

Well boys and girls, we are in the most agonizing phase of the market, the right side of the 10-13 week cycle top, when we sit through day after day of wild gyrations as the street completes its distribution of stock. The fact that it's scam week makes matters even worse. The unwinding and resetting of options positions as expiration day approaches makes cycle charts look like a polygraph of Jeff Skilling's Congressional testimony.

The 10-13 week cycle indicators are rolling over, but they are not at the point where you can feel comfortable that the top won't be retested. It looks like the 8 and 13 day cycles put in a low. The up phase may only be a swup, but it may have more pop left in it. The down phase of the 6-7 week cycle is only sideways so far and it only has a week or so left until its low. The 6 week guys may want to have another go at it before this top is complete. It won't be enough to drive a big move, but it could be enough to get your heart rate up a few notches.

Mixed cyclicality can either cause a market to flatten out, or get extremely choppy. During opex week we usually get the latter. Playing with juxtaposed cycles in the middle of scam week is like swimming in shark infested waters with bleeding hemorrhoids. Not a good idea if you don't want to be eaten alive.

Yes, the market's going to gyrate. But ultimately it will trace out a top. It may take another two to four weeks to complete, but toward the end of that time it will begin to drop in earnest. There will be opportunities to get short along the way. Doc would try to pick off the tops of the 8-13 day cycles. There should be at least one or two opportunities. The first one is due between Friday and next Wednesday. If anything changes between now and then, fear not. The doctor is in.

He won't be long.

That's for sure.

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.

The Feed added $5 billion in 2 day repos. There were no expirations. $6.5 billion in 5 day repos expire Wednesday. No surprise, Al dumped the big one on us. 175 point down days on the Dow tend to cause Al to have a little diarrhea. Very predictable.

Is this the beginning of a massive reliquefaction? So far the Feed Index isn't telling us that. It's only at the top of its neutral trend. It will take at least a few more days before we know for sure if this is really a major policy shift.

Three 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. Feed growth has recently been at or below the lower boundary of that trend. The blue channel going back to last December suggests that Al may now be targeting an 8% growth rate. Then there's the golden box which says he's stopped growing Feed altogether over the last five months.

The Feedometer appears to have broke, out of its short term downtrend, but not the intermediate one. The bill for $40 billion in new Treasury notes has to be paid Friday. Unless there's a lot more Feed by then, it could put pressure in the markets, cycles notwithstanding.

The Feedometer theoretically measures excess Feed available for bond or stock market jamming.

Bond yields ended the day nearly unchanged, after opening sharply lower. Fed governors were running around the country giving speeches about how great everything is. Every time one of them opened his mouth yields upticked. This looks like a short cycle low within a 13 week cycle down phase, all of which are port of a long term bottoming process.

Weekly Money Review

8 Minute Bar Charts 11/12/02 +27.05
Dow Jokes Inflatables

The charts at left show the prior day's action in 8 minute bars with stochastics at %K 26, %D 18, a proxy for the 1 day cycle.

Intraday - The market opened higher and kept going into the 1 day cycle high at 2:30. The long upleg led to a short downleg. Unfortunately for bulls, it was vertical. A 3-day cycle upturn ended within hours of the low, and buy signals on the 5 and 8 day oscillators nearly aborted toward the end of the day. The 1 day cycle low was due at 3:30. They stabilized there, and bounced at the bell. The 5 and 8day cycle oscillators managed to stay positive.

Dow Jokes Inflatables

The Inflatables were the weakest of the major averages as the stage managers heard the call for Philip Morris and did their usual great job of stepping aside. Don't be fooled. The rest of the market wasn't that bad. The Dow is very close to the downside projection for the 13 day cycle and the 10-13 week cycle isn't finished topping out. There's probably not enough gas here for a full retest of the high, but it should at least form a right shoulder over the next week or two.

Portfolio Sphincters Index-SPX +6.76

Nasgap +30.37

Intraday Outlook - A one day cycle low was due at 3:30 Tuesday, and it looks like we got it. Wednesday should start in an up phase, although the slope probably won't be consistent with the cycle map and the high will probably differ as well. If things are really bad overnight, take the chart and tilt it another 30 degrees to the right. That should work. If you don't have a flat screen monitor, be careful not to hurt your back. It's better to have a friend tilt the screen while you stand back and look at it.

The slope and timing of the up phase will tell us a lot about the condition of bigger trends and cycles. The 5 hour cycle high is due between 11:30 and 1 PM, and the 1 day cycle high is due around 2:30. A flatter slope and earlier highs will signal weakening in longer waves. Obviously a move above Tuesday's high will send a different message. The 5 and 8 day cycles appear to be in a weak sideways up phase with a cmap of 895, which was already hit. At this point Doc thinks the cycle map is a worst case scenario, and that the highs could well be lower than projected. We'll recheck in the morning before the open.

5 Day Cycle______ 2-3 Day Cycle_______ 9-10 Hr Cycle_______ 5 Hr- 1 Day Cycle

All of Doc's cycle charts below are powered by METASTOCK. (Sorry about the bull.) You've seen the software advertised on TV. Buy it now at Doc's bookstore! Best price anywhere!

Portfolio Sphincters Index (SPX) and Sentiment

Sentiment and Momentum Indicators

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.

Short Term Cycles

The 13 day cycle probably bottomed. But it looks like a weak swup at this point. Normally, following an absolute high, we see a bounce or two to complete a distribution top. The 6-7 week cycle appears to be in a sideways down phase that's due to end next week. It should limit the upside as the down phase is completed, but allow for a final pop of a few days when that cycle turns up, probably next week.

10-13 Week Cycle

The "top of the top" of the 10-13 week cycle is complete, but there is work to do on the right side of the top. The 29 day rate of change has confirmed the turn. Perhaps two 8-13 day cycles should complete the distribution phase. The cycle low is due in late December or early January. The balance of November looks sideways, then down in December.

VIX

The chart above uses a method for depicting the Stool Bands which results in a smoother curve with a longer lag than what Doc had been using. Based on this method, it appears that the top in progress is significant. It is important to keep in mind that sentiment extremes follow the market's trend. They are not predictive in and of themselves. They give context to the price indicators and vice versa.

Cycle Chart
The red channel is the idealized 2 year cycle. Dark blue is the 10-12, or 6 month cycle. Teal is the 10-13 week cycle. Purple is the 4 or 6-7 week cycle.

Long Term (11/8/02)

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 11/12/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	920 Done
6 Month	Top-Down/3 Mos.	High 920 Done
10-13 Week	Top/0-8	920 Done
6-7 Week	SWD/4-10	855 prelim
20-25 Days	NA/NA	NA
8,13 Day	Bottom-Up/3-6	L876 (Done)

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

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

Doc doesn't think it wise to fool with Mother Nasty. There are easier ways to make a buck. Slower perhaps, but surely less dangerous to your wallet. The 13 day cycle low is probably in. The preliminary upside cmap for the shortest cycles is 1365, and that was hit already. The 6-7 week cycle looked like it was breaking down hard, but after today, it looks more like a sideways down phase. It should last another 4-10 days.

10-13 Week Cycle

The 10-13 week cycle indicator is rolling over. It has a normal lag of a couple of days at the top. !0-13 week cycle top phases can last for weeks, with breakdowns often delayed until the last 2-3 weeks in the cycle. They are marked by confusion, uncertainty, and lots of changes of direction. Look for more of same in the next few weeks.

Long Term (11/8/02)

Nasdaq Cycle Conditions as of 11/12/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	1410 Done
6 Month	Top-Down/3 mos.	High1410 Done
10-13 Week	Top/0-7	1420 Done
6-7 Week	SWD/4-10	1310
20-25 Days	NA/NA	NA
8,13 Day	Bottom-Up/3-7	L1320 Done

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

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 Saturday Weak End Edition, published, uh, let's see, Saturday!

Golden Stool

Short cycles are correcting, and the 6-7 week cycle is probably topping out at it's cmap of 122 but HUI is firm. The down phase should play out as a sideways trading range. The big up will come next year.

Uncle Buck's Illness

Uncle Buck wants to bounce or at least pause in the short run, but longer term, he has a long way to fall.

Suctor Watch and Stoolwethers- Now posted on separate page. Updated each morning between 8 AM and 9:30 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

Welcome, and 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!

Again, thanks for subscribing!

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