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 11/21/02 1 PM

3, 5, and 13 day cycle cmaps are pointing to 930-935. The 5 hour high was in at 11 AM, and the1 day high is now due with a cmap of 930-932. Roast pork, smoked pork, jerk pork, etc. The 5 hour low is due at 2:30, and the 1 day low is due around 3:30, both give or take an hour. The AM cycle map was close to the mark, just a few points low. Here's the PM guess.

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

Pre Market Update 11/21/02 9:15 AM

Fucutures are trading around 923-25 consistent with the high cmaps on the 13 day cycle. Here's a revised cycle map for the first half of the day.

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

Have You Reached a Verdict? (11/20/02)

Here's a chart Doc likes to trot out from time to time when the going gets tough, and the tough get to puking. It's the 29 day moving average of the putzcall ratio. The 29 day average is a rough reflection of the 10-13 week cycle. Sentiment moves in trends and cycles just like stock prices. With some indicators, the trend and cycles are even more clear than they are with stock prices themselves. Although the time synchronization with stock prices may be off by just a bit, its close enough for gummit work.

Raw sentiment numbers take on a whole new meaning when anal yzed in cyclical terms. So, let's see. In two years, the 29 day putzcall has touched the lower limit of its trend channel 6 times. These are the times when sentiment swings too far from the long term trend mean. At those points we assume that sentiment will swing back toward the trend mean and again beyond it. Let's compare each touch of the lower extreme, signifying extreme bullish enthusiasm (or conversely ,extreme fear among bears) with the price cycle condition at the time and see if we can discern a pattern. First, ma damns et mess yours, the chart.

Next, ladies and germs, the table.

Date	Cycle Condition
Feb 2001	Top
May 2001	Top
Jan 2002	Top
April 2002	Top
August 2002	Top
Now	???

Ladies and gentlemen of the jury, have you reached a verdict? Wha dat you say?

Actually there is the possibility that prices and sentiment could break out of the long term trend. It's a slim, remote, infinitesimal possibility, too small to even consider. Heh, heh. If it happens, then we need to recognize the new parameters and live within them. First, give it two days.

The Feed did another $2.5 billion in overnight matched sale-purchases resulting in a net drain of $1.25 billion. On Wednesday the $2.5 billion will come back, offset by $7.25 billion in expiring 3 day repos. The net drain to be offset will be $4.75 billion. But so far, given the lack of extra Feed since Al cut the big one, there is only one logical conclusion to be reached.

He's full of crap.

Total Feed is within the 6 month long, flat growth channel, and centered in the 8% growth channel. There's no jam here. Just Jell-O being pushed around on the plate.

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, at least at the moment. The stock market, after all, is doing well, and when it comes to the market Al is a little slow to react. We know he's watching, and we know he pumps when it looks like the wheels are coming off, but lets face it. He is not the best trader. In fact, he stinks. So quit worrying about him.

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

Bond yields rose sharply. This is Al's real worry right here. If they can't keep the lid on this thing, game over. If capital repatriation is the name of the game can you say Sayonara? The 6-7 week cycle apparently turned up. The 10-13 week cycle remains in a sideways down phase. This is looking like an upside triangle breakout, which would lead at minimum to a retest of the highs. A breakout above 4.35 would confirm that a major bottom is in place. And there's not a damn thing Al can do when this baby blows.

The Mortgage Bonkers Ass. weekly application index, better known to Stoolies as the Mo Gauge rose last week. When it comes to blowing bubbles, Al's got the knack.

It looked like the thing was ready to implode last week. They kept it going for another week with the rate cut. The key now is the 10 Year Treasury yield. If rates uptick, the bubble will collapse. Even if they can keep it down around 4% this thing will slowly lose steam because demand has been met at current levels. The only way to keep it going full bore is to force long rates down, and when it comes to that, the markets are bigger than the Fed.

Stay tuned for related monetary data tomorrow night.

Weekly Money Review 11/14/02

8 Minute Bar Charts 11/20/02
Dow Jokes Inflatables +148.23

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 rose all day Wednesday, coming out of a 5 hour-1 day cycle low just before the close on Tuesday. It went a lot farther than we'd like, but hasn't changed the big picture yet. The major indexes did not make new highs. They weakened in the afternoon, put in a 1 day cycle low at 3:30, then rocketed into the close. The futres blew off after the close on some lame excuse about HPQ's earnings.

Dow Jokes Inflatables

The stage managers are driving the Dow towards a retest of 8750, which remains the 10-13 week cycle cmap. the 8-13 day cycle also looks like a cmap of 8750. The cycle high is due within the next two sessions. The 6-7 week cycle probably has merged with the 4 week cycle, and turned up last week. The topping action of the 10-13 week cycle should keep a lid on the up phase.

Portfolio Sphincters Index-SPX +17.41

Nasgap +44.84

Intraday Outlook - Warning, the following picture may not be suitable for the small children of bears. There are 2 new cmaps to be concerned with about. One is a three day cycle cmap of 918-922 and the other a 13 day cmap of 925. The 13 day cycle high is due Thursday or Friday. A 5 hour cycle high is due at 11 AM and the 1 day cycle high is due at 1 PM, both give or take an hour. The late turn didn't provide enough data for projection of price levels, but it's safe to assume they will be consistent with the 918 to 925 area. The fucutures are at 918 tonight. We'll revisit in the AM 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 13 day cycle top is due within the next two sessions. The cmap is 915-25. The 6-7 week cycle has apparently merged with the 4 week cycle and is heading up, but it is due to top out in 1 to 11 days, based on the last touch of the next larger wave upper band. In flat markets the shortest cycle, such as the 13 day cycle or 8 day cycle tend to dominate. The focus should be on the 13 day cycle. The cycle high is due at the same time that the index will likely blow through the downtrend line from the March high. That's a classic set-up for a Whopsaw and major reversal. If Doc is wrong about that, we should know in a day or two. That will be the time for post mortems. But we ain't dead yet!

10-13 Week Cycle

The 10-13 week cycle cmap has honed in on 935, with anything from 920 to 940 in the range. It will get close Turdsday. The top is still in progress. The cycle indicators are heading down, except for the 29 day rate of change which remains at its high. It is normal for this indicator to lag by a few days at the top. It is a confirmer, not a leader. The current action has all the earmarks of a blowoff. The cycle low is due in late December through mid January. Whether the market retests the lows on this cycle or not depends on what happens over the next 5-10 days. A quick break from the highs would be a good first step. If the market stays rangebound for several weeks, the lows will not be broken on this trip down. We'll have to wait through the next cycle or two. This is what manipulation buys. Delay.

VIX

The VIX broke below 30. The buying panic is on. We have gone from complacency to ebullience. The last time the VIX had blown this far through rising stool cycle bands on the inverted scale chart was June 5 2001. It was a secondary blowoff top preceding a 300 point decline in 3 months.

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 11/20/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	920-940
6 Month	Top/0	930
10-13 Week	Top/0-2	935
6-7 Week	Up/1-11	NA
8,13 Day	Up-Top/0-1	915-925

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 13 day cycle is due to top out over this two day period, with a cmap now at 1430. Re the 6-7 week cycle, as with the SPX, it appears to have merged with the 4 week cycle and bottomed last week. During flat topping phases the 13 day cycle should govern. If the advance extends beyond 1430 after Turdsday, it's a different ballgame, one that we will just have to figure out how to play. It probably won't come to that, but if it does, Doc will adjust.

10-13 Week Cycle

The 10-13 week cycle indicator continues to inch lower. Doc moved the upper channel projection just a hair. Prices are still extended either at or near the top of the channel. Exactly where that channel line is we won't know until after the fact, but it's somewhere around these levels. The atmosphere has reached a level of froth, and on the part of bears, fear, that is bumping against the secular trend at just the right time for an extreme. Doc has no choice but to conclude that the secular trend is intact and that price is nearing the final reversal for this cycle. If that's wrong, and the market breaks out, then the secular trend is beginning to shift, and it will be necessary to recognize the changed parameters and adjust to them. We'll know one way or the other in a couple of days.

Long Term (11/15/02)

Nasdaq Cycle Conditions as of 11/20/02

Cycle	Phase/PTT	Target
10-12 Month	Top/0-2 mos.	1425
6 Month	Top/0	1425
10-13 Week	Top/0-3	1430-40
6-7 Week	Bottom-Up/12-22	??
8,13 Day	Up-Top/0-1	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

The correction continues. The short cycle oscillator has reached a bottom zone. Stabilization should occur any day now. The short cycle downside cmap is 114. However, with the 10-13 week cycle topping out, the next bounce will not carry too far. . Prices should remain within the current trading range for the foreseeable future. No breakout until well into next year.

Uncle Buck's Illness

Uncle Buck's little party may be near an end as the short cycle ozzie reaches the top zone. Considering this bounce came from a major support level, it's pretty pathetic. Still within yesterday's range this morning.

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