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

PM Update 11/20/02 12:30 PM

The 1 day cycle now has a cmap of 914. The 5 day cycle low Doc was looking for for today was yesterday. Ooops. It's too early for a 5 day cycle cmap, but the 3 day cycle cmap only points to 910-915. Looks like a swup. Best guess cycle map below.

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

Updated Cycle Map 11/20/02 10:30 AM

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

Pre Market Update 11/20/02 9:15 AM

The fucutures are trading around 894 after an up and down overnight. Looks like they are coming in to the 1 day cycle low on schedule. Other than no pop on the open, as shown on the cycle map, no change from last night's forecast.

Don't Worry Be Happy (11/19/02)

Oh, yes we have no inflation. According to the CPI numbers, up only 0.3% last month. Al's not worried. The Street's not worried. What does this mean?

It's time to worry.

The TV poodits and analcysts are playing the old complacency game. Everything's just hunky dory. A little correction in the market is a good thing. Nobody's worried about anything. All the bad stuff is priced in, they say. Not to worry. Just send us your money so that we can separate you from it slowly but surely.

Where have we heard this before? Only at every intermediate top in this bear market. The indicators all look the same. Prices are at the tops of channels, upside projections have been met, sentiment indicators are confirming tops, and negative divergences are pooping out all over.

So now we wait. The problem is we don't know how long. This top could turn on a dime and lead to a collapse, sure. But it doesn't look like it will, at the moment. The cycle picture doesn't stack up that way. The 10-13 week cycle has until the middle of January at the latest, to do its thing on the downside. That's a lot of time, but the 6-7 week cycle low is due within days and it doesn't look like the final days of the down phase will see much of a selloff. So whether the market drops the big one on this 10-13 week cycle depends very much on what happens during this coming 6-7 week cycle up phase. If the up phase is has any thrust and staying power, this is going to be a very long drawn out trading range.

But that's not the most likely scenario. Based on the current don't worry, be happy, environment, and the shape of longer term channels, it's more likely that the up phase of the 6-7 week cycle will be truncated. We have seen this phenomenon before. The 6-7 week cycle would have an up day or two, and then get its head cut off leading to 6 week of declining prices.

The key over the next week will be to watch the behavior of the 6-7 week cycle and its indicators. If it falters early, the market will go down hard for weeks. If they don't we'll have to read it and react on a day to day basis. Buy them at the bottom of the range and sell 'em at the top.

Simple.

The Feed entered the market all right. But it wasn't what all of us expected. They drained Feed with an overnight matched sale-purchase of $1.25 billion. There were no expirations. The MSP will be an add back Wednesday.

Feed remains within the 6 month long, flat growth channel, and centered in the 8% growth channel. This is far from the massive jam that was implied by the 1/2% cut. True, 8% growth ain't chicken feed, but it hasn't been enough to support the stock market, given the extreme demands of the credit bubble.

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 is also backing off the intermediate downtrend line. Al shows no sign of wanting to jam the market. If he did, the 1/2 point rate cut would have been the signal, especially with the SPX bumping a trendline. Today's draining suggests they have no intention of jamming. They're so stupid, they probably think they don't need to. They think it's a new bull market. Sonner or later they will jam, just not now.

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

Bond yields fell. Cycle indications remain mixed, as longer waves slowly make the turn from down to flat to up. They don't turn the Queen Mary on a dime. Keep an eye on the triangle though. Could be some sparks if it breaks out early.

With the PPI and CPI news it's time to look at an underlying inflation indicator. Commodities prices have corrected of late but they now look ready to turn up for a possibly sustained move.

The ECRI's future inflation gauge is none too reassuring.

Weekly Money Review

8 Minute Bar Charts 11/19/02
Dow Jokes Inflatables -11.79

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 - There were no surprises Tuesday. The market opened weak as expected, bottomed the 5 hour cycle on time at 10-11 AM, with a 1 day low at noon. The cycle peaked at 2 PM and spent the rest of the afternoon dying into a 1 day low scheduled for Wednesday morning at a cmap of 890 +/-.

Dow Jokes Inflatables

The Dow's cyclicality is mixed and cmaps are all in a tight range. The 6-7 week cycle has been in a sideways up phase that is due to bottom within a few days. That could lead to another attempt to retest the highs next week. The 10-13 week cycle continues to top out. We may not know if the down phase will be sideways or have a negative slope for a couple of weeks, or until the 8300-8700 range breaks down.

Portfolio Sphincters Index-SPX -3.62

Nasgap -19.19

Intraday Outlook - A 1 day cycle low should form between 10 AM and Noon, Wednesday. The cmap is 890. Tuesday's double bottom looks like a 5 day cycle low. That should tend to hold the market up for most of the day Wednesday and perhaps Thursday. 1 day cycle highs are again due from noon to 2 PM. If they come earlier the market is weakening. If later, it's getting stronger. The 8 day cycle down phase should keep the downside pressure on, going into next Monday. Patience is still the order of the day as the top forms. Look for the AM update around 9:15 NY time. Here's Doc's guess for the first half of the day.

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 process of topping out, but it's not yet clear whether the top is finished. The cmap based on daily charts remained at 905. The 6-7 week cycle again appears to be nearing a low with a cmap of 875 which was already reached once. This cycle might turn up after the completion of the 8-13 day cycle down phase. The short term is one muddled picture. Muddled is as muddled does. Don't expect much.

10-13 Week Cycle

The 10-13 week cycle top is in progress. The cycle indicators are heading down, except for the 29 day rate of change which remains stubbornly at its high. Let's hope it's just lagging. That's fairly typical. The cycle low is due in late December through mid January. The balance of November may be rangebound, then down in December. Whether the market retests the lows on this cycle or not probably depends on what happens over the next 5-10 days. A quick break from the highs now would be a good first step. Otherwise we may have to wait through another 10-13 week cycle.

VIX

The VIX reversed from extreme extension. That's a sell signal but these signals aren't always followed by immediate action in the market. They simply confirm that the market is in a 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 (11/15/02)

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 11/19/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	920-940
6 Month	Top/0	920-940
10-13 Week	Top/0-3	920-940
6-7 Week	SWD-Bottom/1-6	875
8,13 Day	Up-Top/0-2	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. In spite of Tuesday's break, another attempted test of the high can't be ruled out. The 6-7 week cycle is in the final days of a down phase with a cmap of 1325. We should see yet another bounce after that.

10-13 Week Cycle

The 10-13 week cycle indicator is drifting lower as the index bumped into the upper channel projection twice. This is exactly how tops are supposed to act, nerve wracking though it may be. 10-13 week cycle top phases are marked by confusion, uncertainty, and lots of changes of direction. Worst of all, they can go on for weeks, or months if concurrent with 6 and 10 month cycle tops.

Long Term (11/15/02)

Nasdaq Cycle Conditions as of 11/19/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	1420
6 Month	Top/0	1420
10-13 Week	Top/0-4	1425
6-7 Week	SWD/1-6	1325
8,13 Day	Up-Top/0-2	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

The 6-7 week cycle is heading down. Initial short cycle cmaps are 115-116. The 110 area is major support. The downs phase should be a trading range. HUI shouldn't get below 110, or above 125, for months.

Uncle Buck's Illness

Uncle Buck got out of bed yesterday. All that exertion isn't good for him. He'll need to get back in bed soon.

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