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?

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 11/19/02 12:45 PM

A 5 hour high and a 1 day cycle low were both due around 12:30. So far the 1 day cycle seems to be ruling. The high is due at 2 PM on the 1 day cycle. The earlier it is, the better. The upside cmap is 902. Downside cmaps on the 5 and 8 day cycles are only 890. Channels are very flat. The 5 day low is due tomorrow. Overall it looks like not much is going to happen for the next few days, barring a rock in the pond. The rest of today may look something like this.

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

Pre Market Update 11/19/02 9:05 AM

The fucutures are in a sideways up phase prior to the bell, trading around 898. No change in the outlook posted last night, still would look for a cmap of 894 in the early going. The cycle map projections should probably be shifted about 4 points higher.

Disorderly Conduct (11/18/02)

Doc likes to bring up this chart every so often to remind us where the market really is, which is below the center lines of several long term linear regression extrapolations. The market may seem crazy and disorderly on a day to day basis, but it is amazing in its orderliness in the big scheme of things.

The chart shows five separate linear regression channel projections. The red projection is based on a linear regression calculated from the market's high in March of 2000 through the April 2001 low. The channels are extended to the present by straight line extrapolation. The blue channel and its projection are constructed from the data between the September 2000 high and the March 2002 high. Note that the center line of this projection exactly matches that of the earlier projection. The green channel connects data from the September 2001 high through this past August. Again, this data had the same center line and the same slope. The brown channel encompasses the data from May of 2001 through this August. Same result.

The recent July-August rally was the first time the market was unable to break the center line within two months of establishing a new low. Here we are again knocking at the door with lots of indications that the market is topping out again. Is it possible the market's long term downtrend is getting steeper? While it may be too soon to make that judgment, it is equally too soon to conclude that this rally is especially significant. Unless and until it breaks the center line the logical conclusion is that the market is actually weakening on a longer term basis. Talk to me if it gets through the center line. Right now it looks more like a ceiling.

The Feed drained $4.25 billion. A total of $11.5 billion in short term repos expired, while Al added back $7.25 billion in 3 day repos. Amazing! Feed is back within the flat growth channel. It is also dead center in the 8% growth channel, and Doc is guessing that's where Al wants it. This is far from the massive jam that was implied by the 1/2% cut. And it is far from enough to provide jam for the stock market. It's toast. Then again, there are no expirations Tuesday or Wednesday. Any new Feed will be a net gain.

So far the new Feed that we've seen in the last two weeks helped neither the bond nor stock markets. This is quintessential pushing on a string. The money has nowhere to go. It may not mean much, but Doc noticed today that the amount of Feed demanded was down to $3 to each $1 of Feed supplied. That compares with 9 to 1 recently. Maybe some day there will be no takers.

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 shows that the pumping began in late October, after the stock market had already moved. Two weeks of pumping has bought the Fed nothing. Further pumping is likely to be increasingly unproductive and even counter productive if the bond boys believe it's inflationary.

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

Bond yields dipped slightly. It still looks to Doc like the down phase of the 10-13 week cycle will be sideways, and that there's an upside breakout in yields out there somewhere in the next couple of months. This will not be an indicator of money going into stocks, but rather it will be a symptom of capital repatriation, as well as perhaps movement into gold and other liquid inflation hedges. The historically normal relationship where stock and bond prices rise and fall together will be restored.

Weekly Money Review

8 Minute Bar Charts 11/18/02
Dow Jokes Inflatables -92.52

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 blew off on the open, right on schedule, then ground down slowly into the one day cycle low at noon. The up phase of the 1 day cycle died early at 2 PM. The 3, 5, and 8 day cycles began to rollover and the market was weak right into the bell. The action of up phases getting shorter tells us that longer cycles are beginning to roll over.

Dow Jokes Inflatables

The 10-13 week cycle top is progressing smoothly and it looks like the November 6 high will stand. The 13 day cycle topped out Monday, but will probably poke it's head up again before going into the down phase. The 6-7 week cycle is near a low. The cmap appears to be around 8300, due within a few days. This is a recipe for continued chop as the 10-13 week cycle top plays out for another week or two. The mid to late December period is shaping up as having the highest probability of a bigger drop.

Portfolio Sphincters Index-SPX -9.47

Nasgap -17.44

Intraday Outlook - Tuesday, look for a 5 hour low around 11 AM, give or take, and a 1 day low between 12 and 1 PM. The cmap is 894.50, plus or minus a nickel. The cycle map is drawn just a bit weaker than that. We'll see. They should try a weak recovery after mid day. The 5 and 8 day cycles are rolling over but it's too early for a cmap. Lows on those are due Wednesday, and then Monday or Tuesday of the following week. Look for any revisions in the AM update posted by 9:15 NY time.

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 the last days of the up phase. It probably topped out already but the daily indicators haven't confirmed yet. The cmap based on daily charts dropped to 905 and dey done doed dat. Normally, following an absolute high, we see a bounce or two to complete a distribution top. This is bounce one. The 6-7 week cycle again appears to be in a sideways down phase with a few days left and a cmap of 875. After this 8-13 day cycle, look for one more wave to complete the intermediate top.

10-13 Week Cycle

The 10-13 week cycle topping process proceeds. The cycle indicators are heading down, and the 29 day rate of change downticked. After last week's whipsaw in that indicator, the odds are the next signal will confirm a reversal that has already taken place. This indicator often lags by a few days at the top. The cycle low is due in late December or early January. The balance of November looks rangebound, then down in December. Whether the market retests the lows on this cycle or not is still an open question. A quick break from the highs now would be a good first step. Otherwise we may have to wait through another cycle. Yeah, one more stinking "bottom." Should make Wack Street punks like Jack Rivkin happy. Watching him on Crapvsion this morning the thought came to me that that guy epitomizes what's wrong with Wack Street. What a creep.

We should have a better idea whether this thing can get back to the lows on this cycle after next week.

VIX

The VIX blew off some more, indicating growing complacency. Wonderful. From the standpoint of Stool Band violations, this is about as extreme as it gets. These options players are always fighting the last war. It's time to fade 'em.

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 (11/15/02)

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 11/18/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	920-940
6 Month	Top/0	920-940
10-13 Week	Top/0-4	920-940
6-7 Week	SWD-Bottom/2-7	875
8,13 Day	Up-Top/0-3	905 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

The 8-13 day cycles are topping out, with a cmap of 1420. The 6-7 week cycle looks like it's in a sideways down phase again with a cmap of 1325 and a couple days to go. So c'mon down!

10-13 Week Cycle

The 10-13 week cycle indicator remains on a sell signal. The negative divergence means distribution, the Street doing its thing. The 6 month cycle oscillator whipsawed. That's ok. Whipsaws in cycle indicators mean an overextension of the trend, painful nevertheless. The big cycle trend channels are the key for longer term cycle direction.

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 is the order of the day in the media and poodit fraternity. Bears lose patience and many crapitulate. We saw a lot of that over the weekend. Everywhere Doc looked there was crap from crapitulating bears. P-U. It stunk.

Long Term (11/15/02)

Nasdaq Cycle Conditions as of 11/18/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	1420
6 Month	Top/0	1420
10-13 Week	Top/0-5	1425
6-7 Week	SWD/2-7	1325
8,13 Day	Up-Top/0-3	1420

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

Cousin HUI hit the 6-7 week cmap of 125 a week or so back. Looks like he'll go rangebound for a few weeks, then up again. But the big upside breakout probably won't happen until well into 2003.

Uncle Buck's Illness

Uncle is not looking well as the current short cycle up phase begins to run out of time. He may try another bounce after retesting 104, or he may not. He's headed for a major breakdown one of these days.

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