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.

Big Fine Print Doc does not make trading recommendations. This update reports time cycle estimates and centered moving average projections based on the Hurst cycle analysis method, and other techniques. 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? More disclaimers at the bottom of the page.

Doc welcomes the many new junior stock proctologists who have joined the American Society of Shortsellers in the past week. If you are not an experienced chartist or trader, ok, even if you are, you may find the Anals just a bit confusing for a little while. But Fear Not! You will get it after a few days, at most a couple of weeks. Questions can always be posted on the Stool Pigeons Wire message boards, where Doc and/or your fellow stoolies will respond. Explanations of abbreviations and terms are at the bottom of the page. The complete list of links to the entire archive is in the left column menu. Now it's time to sit back, relax, and enjoy the show.

Many tanks!

Doc

Intraday Updates 2/6/03

12:45 PM The market is in the topping phase of the 1 day cycles. We are seeing signs of a 3 day cycle low and possible swup developing. Could mean more frustration for us in the PM. The 1 day cycle down phase may not be as weak as Doc was anticipating this morning. The sphincters are holding shport. The ammo is limited, but they haven't run out yet, and have been able to hold things together temporarily. It won't last, but it may not break down today.

9:15 AM

Fucutures are down, foreshadowing a gap down opening. Based on the pre-market fucutures, the 1 day cycle cmap on the SPX is around 835, due around 10 AM. The 3 day cycle cmap due later today or tomorrow is 828, based on the fucutures.

Chart below. Get regular updates throughout the day in Stooltrading.

Intraday Wednesday - Fucutures were ramped hard heading into the open, and the market followed. It pulled back around 10 AM in a retest of the 1 day cycle low from Tuesday, then rose steadily into the cycle high at 12:45, in a spike shaped, 3 day cycle up phase. They fooled around up there for an hour. Then it all came apart. Then entire move was undone by 3 PM. That was the 5 hour cycle low. The market stabilized into the close. A one day cycle low could carry prices lower on the open tomorrow, then we should see another rally as the 1 day cycle up phase carries into mid day again. This up phase is unlikely to be so robust as today's. There's still one day to go in the 8 day cycle down phase. The cmap is 833. But the 13 day cycle could fade for up to 5 more days. Chart below. Get regular updates throughout the day in Stooltrading.

Pre Market Update at 9:15 AM NY time.

Get StoolieSignal Special offer here only!

The cycle map below is en estimate of how the market might behave over the next few hours. Should the pattern be broken, the map should be redrawn to fit the actual. Cmaps and times shown are guidelines only. Cycles vary in wavelength and amplitude. Directional changes within an hour of the expected turn and a few points of the cmap should be respected. The indicators rule. Times and prices are the projected cycle highs and lows with cmaps.

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

Wednesday's Markets

Toast 2/5/03

The market got jam in the morning. But in the afternoon, it was toast. It could be dry toast for the next week. Short cycles are lining up for a possible 5-6 day plunge. Details below.

Wednesday is the day we get our second favorite financial system liquidity indicator, the MoGauge, straight form the MoGauge Bankers Ass. of America. Read the fine print below if you don't already know why stoolies love this indicator so much. Basically, it's the only truly leading indicator out there, actually telling us what is going to happen about two months in advance. Of course, some interpretation is required. While Doc doesn't always interpret correctly, more often than not, this indicator has tipped us off about what to expect in terms of future twists and turns in the secular trend. The slowing in the indicator over the last four months clearly foreshadowed tightening credit bubble conditions leading to liquidity problems in the stock market. Before that it foreshadowed the reliquefaction and market rally in the fourth quarter.

This week the MoGauge continues to waffle. Applications are stagnating, as they have for the past four months. So we will continue to expect money supply growth to stagnate down the road. The stock market has fallen even as the MoGauge remained at high levels, but flat. That is the key. If liquidity does not grow, the markets falter. And liquidity has stopped growing even with interest rates and bond yields near record lows. What happens when bond yields start to uptick? In a word, disaster. The powers that be cannot afford to let it happen, but they may be powerless to stop it.

Mortgage applications get funded about 4-8 weeks after the application is taken. When the GSE's hold those loans in their portfolios, they then turn into money through the magic of money market fund intermediation. Broad money supply grows, and that flows into the markets and economic activity. Likewise, when mortgage activity declines, money growth slows or even goes negative. In effect, the MoGauge has the potential of telling us to what degree money will be added to the system in a month or so. Big jumps in the MoGauge tend to be followed by big stock market rallies along with big jumps in money supply. When these bulges subside, the market follows a month or two later.

Keeping lending rates flat and low is no help whatsoever. Demand is waning, in spite of record low mortgage rates. Refi apps are making lower highs, and purchase applications have been downtrending for 7 months. When rates do finally uptick, purchase apps may spurt for a bit as buyers rush to get into the market. But the refi market will collapse and it's nearly 75% of the market, and the refi boom has been what has been driving the credit bubble. The credit bubble is on its deathbed. Any downtick in refis, and the system will come to a halt.

Turdsday night we'll get the complete review of the Fed's weekly releases. Here is last week's.
Fed Releases Turdsday

Doc's Pooper Scooper.

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

The Feed added a huge $8.75 billion against $4 billion in expirations, for a net addition of $4.75 billion. The $8.75 billion, as well as $5 billion in 9 day repos will expire Turdsday along with the usual 28 day rollover, this time in the amount of $3 billion. That means Al must roll $16.75 billion to stay even. Doc speculated yesterday that the bond market rally would give Al a little room to do some Feeding in advance of Turdsday's big roll over. Sure enough he came through. Probably wanted to give Colin a little help too. Nothing would be worse than a tanking market while he was making the US case to the UN. (Has anyone noticed what UN spells?)

Total feed has ticked above its 20 day moving average. Feed remains in a neutral trend over the last 10 weeks, and still down in the last month. This uptick probably means nothing. We'll need to wait a few days to know for sure.

The reflation everyone was crapping themselves over at New Year's remains a mirage. 6% growth over the last year is tepid compared to the year before. Al has to hold back to support the dollar and keep inflation fears under control in the bond market, lest he collapse the mortgage bubble all at once. Any yield uptick at this point will cause an immediate shutdown to the refi spigot..

Two 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. The blue channel going back to last December suggests a 5% growth rate. Look at the 4 week moving average (brown line) and compare it with the slope of the tow larger channels for an indication for whether the slope of short term growth is slower or faster than the 2 longer term trends.

The uptick did not reverse the Feedometer. That means there's still far from sufficient excess Feed to support stock prices. The Feedometer's downtrend indicates Al is still draining excess liquidity. In addition to trying to stem capital outflows, support Buck, and calm inflation fears, Al also made clear some time ago that he doesn't like those huge deficits shrub is running up. So he's pulling in on the reigns a bit. That means no reflation, and no soup for you, Mr. Stock Market!

The Feedometer theoretically measures excess Feed available for bond or stock market jamming. Al selects a trend level he feels is needed to reflatulate the economy. The Feedometer measures the difference between the apparent trend target, and actual day to day Feeding (Fastow Feedometer), as well as a four week moving average (Slowmo Feedometer). A break above the orange trendline might indicate a more aggressive jamming policy.

Bond yields rose. Is this the beginning of the big move to the sky? Day one of the Great Bear market in bonds? Too early to know for sure, but there are hints, ever so slight, that it might be. It will be at least a couple more days before we can tell for sure.

Long Term

Dow Inflatables- The morning blowoff was probably the top of the Dow's 13 day and 4 week cycle swup. All cycles should be in gear to the downside for the next 6 days going into a 6-7 week cycle low. There are still five to eight weeks left in the 10-13 week cycle down phase.

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

Cycle Chart
The red channel is the idealized 18 month-2 year cycle. Dark blue is the 10-12, or 6 month cycle. Teal is the 10-13 week cycle.

Short Term Cycles

The 4 week cycle has been in a swup. Looks like it is coming to an end. The 4 week cycle up phase normally manifests as a slowing in the downtrend or a sideways movement when longer cycles are heading lower. The short cycle oscillator rose slightly again and has reached the 50% line. This is exactly what is supposed to happen during a swup, and it portends a sharp drop ahead. Downturns from this level are usually associated with devastating declines. A down day or two will turn that indicator. Taking out 840 decisively will signal that the 4 week cycle up phase had ended early. That would put all the short cycles back in gear, and signal the beginning of a collapse that lasts up to 7 days, going into the 6-7 week cycle low.

The 17 day rate of change remains in a downtrend. The downside cmap on the 6-7 week cycle dropped to 820, but that should go lower.

The 6-7 week cycle oscillator on the chart below Continues to break down. Look for a zigzag, along with a positive divergence relative to price, before the market rallies. This process usually takes about a month. The indicator is not delimited. It can drop well below the level of recent lows. Don not assume from its current level that the market is Dover Sole. We know that there is no such thing in this phase of the cycles.

10-13 Week Cycle

Roughly 6 to 9 weeks should remain in the 10-13 week cycle down phase. Oscillators are heading down slowly. The one in the top chart is getting into a bottoming zone but it's a delimited indicator that can remain low for weeks as the market drops. When the indicator comes out of a trough, with the 29 day ROC and the Stoolicator confirming, a new up phase will have begun.

The 29 day rate of change is still trending gradually lower, almost flat. A flat movement below the zero line indicates mild trending, a condition that can last for weeks. The preliminary cmap has dropped to 770. Cmaps are moving targets, potentially revised daily based on the market's current action. It is very early in the cycle and the number will change frequently until the lows are reached.

Sentiment

VIX rose slightly. (down on the inverted scale chart). Over the next few weeks the channels will turn lower and we should see much bigger numbers on VIX. The next big intermediate cycle low should reach at least 50-60.

The 15 day rate of change is a proxy for the 4-7 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.

Long Term

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 2/5/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/4-6 M	720p
6 Month	Down/0-8W	750p
10-13 Week	Top-Down/27-42	770p
4-7 Week*	Down/0-7	820
8,13 Day	Down/0-5	827

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
* The 4 and 6-7 week cycles are distinct but usually overlap. The dominant cycle is reported.

Suctor Watch and Stoolwethers- Updated each morning between 8 AM and 9:00 AM NY time.

Nasgap Charts

The Nas is expected to behave more like the SPX with the continued de-weighting of tech. In the interest of publishing the Anals earlier in the evening Doc is presenting the charts and data without commentary, as it is largely redundant relative to the SPX commentary above.

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.

Long Term

Nasdaq Cycle Conditions as of 2/5/03

Cycle	Phase/PTT	Target
10-12 Month	Top-Down/4-6M	1000p
6 Month	Down/0-8W	1200p
10-13 Week	Top-Down/27-42	1200p
4-7 Week*	Down/0-9	1180
8,13 Day	Down/0-5	1240

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
* The 4 and 6-7 week cycles appear to have merged into one.

Suctor Watch and Stoolwethers- Updated each morning between 8 AM and 9:00 AM NY time.

Long Bong Hit - See top of page.

Golden Stool 2/5/03 PM

Gold had a minor pullback Wednesday, after blowing through an uptrending resistance line on Tuesday. The next target is 385, which is a 9-12 month cycle cmap and isn't due till mid year. We should see it sooner, but it should consolidate first. The break above the resistance trend suggests that this move could ultimately run to 435 by May or June. The 18 month cycle cmap is 405. At current prices risks are increasing, and its time to think about booking profits as the cmaps are approached. There's still time to hold, but not to chase, unless you are adept at scalping.

Charts as of 2/4/03 Close

HUI's 4 month (or 13 week, take your pick) cycle has been in a sideways down phase for 6 weeks. The end of the down phase is due at any time within two weeks. The big pop on Tuesday was a fakeout. Or maybe today's selloff was. Once they break out above 155, the cmap will be 215, probably by mid-year. Short cycles are mixed. We'll have to wait for the breakout to get a clearer picture. It could be another 2-4 weeks before that happens.

HUI Cycle Conditions as of 2/5/03

Cycle	Phase/PTT	Target
9 Month	Up/4-6M	215p
4 Month	SWD/0-2W	138
4-7 Week	SWD/5-20	135-138
8,13 Day	Bottom/0	137-140

Long Term

Uncle Buck's Illness Comments 2/5/03

Uncle Buck looked like he was gonna fall right through the floor overnight but the PPT came to the rescue with a massive jam beginning around 7 AM. So he's still in that short term and possibly 13 week cycle swup. For now. The upside cmap on the 8-13 day cycle is 100.50. Longer term cmaps look like the low 90s by mid year. Uncle B and SPX (gray line on chart) usually move together because Uncle Buck's index measures the flow of capital into and out of US paper assets. The relative magnitude of the moves varies and wide divergences are followed by convergence. Central banks intervening to buy dollars are not going to help stock prices, and cannot drive sustainable advances in the dollar. The current divergence is therefore likely to be resolved by falling stock prices.

Chart as of 2/5/03 close

Long Term

Get StoolieSignal Special offer here only!

Suctor Watch and Stoolwethers- Now posted on separate page. Updated each morning between 8 AM and 9:00 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

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!

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.

About centered moving average projections.

ABBREVIATIONS:

cma: centered moving average
cmap: centered moving average projection
os or ozzie: oscillator
sto: stochastic
swup: sideways up phase
swdp: sideways down phase