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?

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PM Update 11/15/02 1 PM

Normally at the end of scam week in the hours leading up to 3 PM, the stage managers pin the market so that they can unwind positions in an orderly way. That's probably what we'll see again for the rest of the afternoon, with a selloff possible in the last hour. But for the most part any big movement is unlikely. Still close to sell signals on the 5 and 8 day cycle, but not quite there yet. The 5 and 8 day cycle cmaps have settled in at 901-905. Here's what we might look for this afternoon.

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

Pre Market Update 11/15/02 9 AM

Doc is working blind this morning. (So what else is new?) No deadcharts. The fucutures are down on the PPI news. Doc suspects that the SPX will not make it to 910 later today as the orange line drawn last night suggests. Doc will post an update here after the open.

Bullishness Abounds (11/14/02)

Doc wants to thank our good friend Ike Iossif of Marketviews.TV and Aegean Capital for bringing this to our attention. "On 10-15-02 the SP was at 897, and the Investors' Intelligence report showed 28.4% bullish advisors. A month later the SP is at 902, yet the percentage of bullish advisors has increased to 51%! That's a 76% jump while the SP has made no progress!!" Not to mention the fact that VIX just blew out. The end of day tick readings are at a 3 year high, and the 29 day TRIN is at an extreme low that is normally associated with a top.

Even some of the smartest friends of Stool have abandoned the bear case. (We won't mention any names). It's very lonely, and very scary out there. The market feels like it's going to explode to the upside. The charts however tell a different story. They say sure, there's a lot of volatility, but in every way this looks like intermediate top building. We have froth in the sentiment indicators, and lopsided buying concentrated in a few big cap stocks, especially in the biggest pile of junk, the Nascrap.

To top it off, Jimmy Jones is screaming like the ugly lying hyena he is, "Drink your Koolaid all you bears!" Doc wishes he had time to compile all this guys lies and expose him for what he is. A fraud.

Well, we bears are just going to have to endure the derision, the loneliness, the feelings of disorientation and abandonment for a few more days. Carnival is almost over, and the drunks are going to have to sober up, because there ain't no mo booze. It won't be pretty.

The Feed added $6.25 billion in 4 day and $5 billion in 28 day repos. Sounds like a lot, but it was a drain of $2.75 billion. $12 billion in one and two day repos along with $2 billion in 28 day repos expired. The $40 billion payment for the new Treasury Notes is due Friday. That's what that giant sucking sound out of the bond market, was all about. If the stock market doesn't buckle Friday, something real fishy is going on. Manipulation and market interference can only last so long. When it's withdrawn, the market simply collapses.

he Feed Index is still not telling us that this is the start of a major reliquefaction. It downticked at the top of its neutral trend and maintains 8% growth over the last year. They're gonna have to do a lot more for a lot longer if they want to jam this market. There are just too many other claims on the money. Surprise, surprise, there are no expiring repos tomorrow. I guess the Fed knew what it was doing. Maybe they'll do a $40 billion jam.

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 has broken out of its short term downtrend, but not the intermediate one. With the giant rollover, and settlement on the notes due, what the Feed does Thursday could be the tell on their longer term intent.

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

Bond yields blasted off. Short cycles are heading up, while the 10-13 week cycle appears to be establishing a sideways down phase. This is consistent with the formation of a major bottom. Look for a month or two of racing back and forth across the current range before yields break out to the upside. Why did bonds sell off so much today? Let me count the ways. I can think of 40 billion.

Weekly Money Review

It should come as no surprise to Stoolies that a flat Feed would begin to suppress growth of the monetary base.

Last week, in spite of mortgage rates dropping to their lowest levels since Adam and Eve, total mortgage applications dropped. We'd expect that to result in a slowing of growth in broader monetary measures 4-6 weeks later.

MZM had already begun slowing in spite of the massive growth of mortgage credit.

Part of that was due to Al tapping on the Feed brakes, leading to flat M1. Still dead in the water through November 4.

Total bank credit is still growing. But a lot of that is in holdings of the burgeoning supply of government securities. Loan growth is flattening.

Commercial and Industrial Loans are dead in the water. We can assume that most of the lending is in the consumer sector. Gotta keep that consumption bubble going!

The non-financial commercial paper market continues to contract.

This is still not a picture of a financial system awash in liquidity. The rise in long term interest rates will further suppress mortgage credit creation, putting further stress on the system in the months ahead. This will pressure both bonds and stocks. The inverse relationship of stock and bond prices will soon be restored to the more typical one historically, where both move in the same direction. Doc wouldn't hazard a guess as to when that will be. The markets will let us know.

8 Minute Bar Charts 11/14/02
Dow Jokes Inflatables +143.64

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 - They took off from the opening bell and never looked back. Once again, the 5 hour cycle was dominant, rocketing off Wednesday's 3 PM low into a high at 10 AM. Because of the extreme upslope of the 5-8 day cycle, the cycle highs were below the price highs. The first wave lasted only 3 hours into a noon low. There was a 3 hour wavelet high at 1:30 and a 5 hour cycle high due at 3 PM, but it pushed right through that. With all the opex nonsense going on, the cycles turned into a near straight line trend. Dell has taken some of the bloom off this stinker in the aftermarket, but there will be more nonsense tomorrow. 5 and 8 day cycle cmaps look like 914 on the SPX hourly charts.

Dow Jokes Inflatables

The 8 and 13 day cycles came out of their lows. The 6-7 week cycle sideways up phase is coming into a bottom as the 10-13 week cycle continues to top out. While it looked like a right shoulder would form, the recent low is a little too high for comfort. There may still be enough juice here for a full retest of the highs.

Portfolio Sphincters Index-SPX +21.74

Nasgap +50.18

Intraday Outlook -

It's scamjam week. Why bother doing this? Got to keep up the discipline. Actually, the market is conforming to the cycle outlook fairly well. It's just a little stronger than Doc would like it to be, but no harm done to the cycle picture.

What was that at the end of the day yesterday? It looked like an extended five hour cycle high. The aftermarket reversed when the farmer got out of the Dell. The rest of the big five, Mr. Bill, Crisco, and Tell, all downticked a little while the last farmer in the Dell got whacked for 3%. That should translate into a weak open, but Doc guesses that the selling will be short lived because the 1 day cycle will want to make a low early. The cmaps on 3-8 day cycles are around 910-915. The first half of Friday may look like this. Stay tuned for the Pre Market Update.

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

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 8-13 day cycles are in an up phase. It could end Friday, or any time next week. Normally, following an absolute high, we see a bounce or two to complete a distribution top. The 6-7 week cycle is in a sideways down phase that's due to end next week, but it may be out of synch, and coming off a low now. Right now the only clear cycles are the 8-13, so let's key on those. The upside cmaps are 905-910 on a preliminary basis. That would make a nice right shoulder. Could be too much to expect. Let's keep the potential for a double top in the back of our minds

10-13 Week Cycle

The "top of the top" of the 10-13 week cycle looked complete a couple days ago, but it's hell week, and they may stick a double top on us. The cycle indicators are heading down, but the 29 day rate of change reared up again. Let's hope that's just a normal lag. Let's face it. If a top wasn't scary as hell for bears, it wouldn't be a top. The cycle low is due in late December or early January. The balance of November looks sideways, then down in December.

VIX

The froth is on the beer. The VIX blew out of the bands today. Bullish confidence reigns supreme. That's the kind of environment that's typical of a six month cycle top.

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 11/14/02

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/0-6	920 Done
6-7 Week	SWD/2-8	865 prelim
8,13 Day	Up/1-5	905-910 prelim

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

The 8-13 day cycle is in an up phase. Because of its lack of liquidity in both directions, the Nasty can inflict more than its share of pain even when only in a trading range, and it gave Doc a Nasty surprise Turdsday. The upside cmap for the shortest cycles is now 1415-1430. The cycles could top out Friday, or the up phase could drag well into next week. The 6-7 week cycle is unclear. It may have just made an early bottom. Let's leave that in the uncertain column and focus on the 8-13 day cycles.

10-13 Week Cycle

The 10-13 week cycle indicator is on a sell signal but there's a clear and present danger of a whipsaw. The 6 month cycle oscillator has already whipsawed. Doc will assume that's just a double top. 10-13 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. Bullishness abounds. Sounds like that's where we are.

Long Term (11/8/02)

Nasdaq Cycle Conditions as of 11/14/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	1410-1440
6 Month	Top/0	High1410-1440
10-13 Week	Top/0-7	1410-1440
6-7 Week	Uncertain/3-9	NA
8,13 Day	Up/1-5	1415-1430

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

Still mixed signals for Cousin HUI as the basing process continues. Short cycle lows look like they'll be hit next week. The 13 day cycle cmap may be as low as 110 on an intraday basis, but probably not less than 115, close.

Uncle Buck's Illness

Looks like Uncle Buck's last hurrah in the topping process of the 1 year cycle.

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

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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