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The Anals of Stock Proctology

Published weeknights by 8:30PM Happy Acres, Florida Time
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The American Academy of Stock Proctology and
the American Society of Shortsellers
Dr. Stepan N. Stool, A.S.S. Chair

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Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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Pre-market, PM and 4:00 updates are here.

Closing Markets 8/19/03

Cycle Conditions Tables 8/19/03

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. Charts and discussion below. Note: The Cycle Conditions Charts and daily discussions are updated daily, and supercede the weekly long term chart discussions.

SPX (Charts and Discussion)

Cycle	Phase/PTT	Target
6 Month	SWD-Bottom/12-22	??
10-13 Week	Up/5-20	??
4-7 Week*	Up/4-9	1015
5,8,13 Day	Up-Top/0-3	1005

Nasdaq (Charts and Discussion)

Cycle	Phase/PTT	Target
6 Month	SWD-Bottom/12-22	??
10-13 Week	Up/5-20	1795?
4-7 Week*	Up/4-9	1785-1825
5,8,13 Day	Up-Top/0-3	1765

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 overlap. The dominant cycle is reported.

Cycle Map 8/19/03- Doc's best guess on where the market is headed over the next few weeks.

The 6-7 week cycles, along with an occasional 4 week cycle, have been the dominant waves in the market for the last several months. That should continue until the bigger down leg gets a push, and trending takes over. The 6-7 week cycle is rising, with a high due in late August or early September. An earlier high would mean liquidity and demand are weak, and that bigger cycles are weakening. A later high would signal the opposite. As of now the slope of the up phase looks like it is mildly positive and is headed for at least a retest of the highs.

The 10-13 week cycle does not appear to be a significant force at this time. The cycle is in a sideways up phase with apparently a mildly positive slope. Because of diminishing volatility, Doc has reduced its band width to about 50 points. The SPX should move to the top of the wave band. If the current move goes above 1010, the wave is rising, and higher highs would be likely.

The 6 month cycle is in a gray area as it comes to a close. There are two possibilities. The final days of any cycle are often marked by sharp declines. Before we get to that potentiality, however, the up phase in shorter cycles which began last week will intervene, possibly into late August or early September. That could be followed by a sharp selloff into the 6 month cycle low. However, at times the 6 month cycle lasts only five months, raising the possibility that last week's low may have been it. Each day the market rallies, that scenario becomes the more probable one. What it does not tell us is how long the up phase will last. With the 10-12 month cycle rolling over, it should be restrained. If the market moves above 1015, that would lead to a brief spike. On the other hand, a break below the 960 area should begin a sustained downtrend. That could be months away.

18 Month Cycle ________ 10-12 Month Cycle_______ 6 Month Cycle_______ 10-13 Week Cycle______
6-7 Week Cycle________

Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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MoGauge Collapse Continues 8/13/03

Dow Inflatables 8/19/03- The Dow extended its rally as a result of the late day save, continuing its battle with major resistance. The 6-7 week cmap is pointing squarely at 9525. Other cycle cmaps could plausibly be anywhere up to 9800. 9450 is stiff resistance, and if the stage managers manage to break through that, than 9800 is probably an easy run to pull off. If it fails to close above 9450 within the next day or two, then the rally is probably over. The rest of the market is lagging the stage managers index, a classic negative divergence.

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.

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Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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Portfolio Sphincters Index (SPX) and Sentiment 8/19/03

Cycle Conditions Table

Cycle Chart
The dark blue channel is the idealized 18 month-2 year cycle. Magenta is the 10-12 month cycle. Green is the 6 month cycle. The thin red and blue channels are the 10-13 and 6-7 week cycles, as projected. Those projections shift day to day in response to the market.

Rising hysteria. Bears crapitulating. The streets brown with dung as bears turn against one another, losing bowel control in the process. It is a stinking, ugly mess. Yet there is nothing surprising here. Or at least it shouldn't be surprising. On August 11, Doc warned that cycles were as favorable as they could be for an upmove. Doc believes now that this is the final gasp of the bull forces. Their supply lines are stretched. Their front line are troops are not unified. The leaders are charging ahead, but soldiers are loathe to follow. They are running out of fuel and resupply efforts are falling short. The bull attack is puny by comparison with past charges on multiple cycle upturns. It will end within days, no later than early September, perhaps sooner. Bears must learn to be patient, to conserve resources, to lie in waiting until the moment arrives, then seize the day! Now is not our time. But it's coming. Whether it's at 1005, 1015, or 1035 does not matter. The end result will be the same. Do not anticipate. Do not fight the tape. Let the indicators do their job. They will tell us when to counterattack.

Sentiment

Breakout! VIX was already low and blew out to new lows (higher on the inverted scale chart). Sleepy complacency goes on. SOMA, SOMA, SOMA, the masses chant as they await their daily drug fix from the Feed's System Open Market Account. And they get it, and all's well. Just keep your heads in the sand, people.

In the final stages of the top, sentiment remains ebullient well beyond the highs. Hitting 20, then reversing, has repeatedly marked major tops over the last five years. If the market goes higher and VIX goes lower still, we have to learn a new game. However, if the advance is contained without a breakout on the SPX, combined with new extremes on VIX, the end is nigh.

Investors Intelligence reported advisory sentiment remained overwhelmingly bullish last week. Bulls were at 52% and bears 19%. Bulls have come down from 60% on June 19, but bears have only risen from 17%. Most bullshift has gone into the "correction" camp. Let me just say this about that. We are not on the Dawn of Correction. More like the Eve of Destruction.

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 blue line overlaid on the price chart 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 8/15/03

Here's the current long term projection for the SPX. Note that a 61.8% fiber nacho retracement of the last leg down is complete. Longer term cmaps had suggested that a final burst to 1050-1075 could occur. Long term upside cmaps don't always get hit. Given what's going on in the liquidity picture, Doc likes the projection below, which is more like the forecasts from past months. It points toward a retest of the lows no later than the second quarter of 2004 and a sub 700 SPX by 2005.

Upon examination of past lows in the mid 1990's, Doc saw two critical lines relative to the massive Hunchback top spanning four years. The first line now projects through 995. The second is around 961. Getting below both levels would create a WHOPsaw, a massive false breakout that fools and traps the majority. The 10-12 month cycle oscillator is turning down suggesting a move to 900 over the next few months, enough to turn the 18 month cycle lower as shown.

The longer the nominal cycle length the greater the variance in the actual length of the cycle. The 18 month cycle can range from 12 to 24 months. The nominal 4 year cycle can be 3 years. It can be five years. Four years, give or take a few months has been most typical, especially in the latter half of the twentieth century, but a 3 year cycle is not uncommon. In the first half of the century, cycles frequently lasted 3 or 5 years. Hurst called them "nominal" cycles because cycles vary in length. Looking at charts going back 100 years or more you can see that a 1 year variance is not uncommon for the 4 year cycle. (Subject to change without notice. Dealer title, tax, and tags not included. Consult your local directory for prices in your area. Past performance is not necessary to be a Wall Street analcyst.)

The Portfolio Sphincter's Index is now 45 weeks off the October lows. Here's where the Nikkiu was 45 weeks after its 1992 bubble bust low. We are beginning to see some divergence from the Nikkiu path as our market did not see the three week break the Nik had before beginning a 10 week long push to retest the highs. Our market looks like it will retest in less time and push a little higher before succumbing to a big break.

The US bubble bust markets have been following the Nikkiu model with but minor variations for nearly three and a half years. Given that the systemic responses have been similar, I see no reason to believe the outcome will be different this time, i.e. years of stagnation followed by another collapse.

The wild sentiment readings and the concentration of speculative activity in the market's worst pieces of trash suggests an exhaustive blowoff of historic proportions. Be that as it may, the rally has pushed long term cycle oscillators to the point that should they rise any more, a change in the long term secular trend would be indicated. It appears that longer term cycles are turning flatter, similar to the Nikkei experience of the 1990's. That still leaves prices at, or near, the top of longer term channels, portending a major decline ahead. But instead of looking for lows in the mid 600s next year, the pullback would probably only go into the low 800s.

Basic Edwards and Magee Update- The oldest, and simplest of the modern era theories on technical analysis may still be the best. This chart suggests that the long term downtrend may still be intact up to about 1025.

Here's something interesting. In July of 1998 the market launched a counter trend selloff. It lasted 12 weeks. The high of the move was 128.7% of the low. The recent rally phase lasted 15 weeks. The high of the move was 128.7% of the low. Here we have examples of two huge countertrend moves which went to extremes in violating long term trendlines. The July 1998 example bent, but did not break, the bubble uptrend. The recent rally was a mirror image. Except now, there's no reversal. Instead we see consolidation. Is it distribution, or accumulation for a final blowoff? The cmaps say, there's a final blowoff ahead. The Nikkiu model says, the goose is cooked right here.

Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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Nasgap Charts 8/19/03

Cycle Conditions Table

The Nas is showing hints of a 6 month cycle low concurrent with the recent upturn in the 10-13 week cycle. Cmaps have moved up sharply, and 1800 now looks increasingly likely. Momentum is weak relative to past advances, so far. If this growing negative divergence is not resolved before the market peaks, the next move will be down big.

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 8/15/03

Looking at the 18 month cycle cmap, the indication is that the 1750-1800 area is the top on the Nas. Once the 10-12 month cycle oscillator rolls over, it's over. It looks like it's starting, but it could take months to complete the distribution. The Nas needs to get below 1600 to confirm the beginning of the 18 month cycle down phase. That would also be the point at which the index falls back below the neckline of the huge 4 year long Hunchback top formation. But first it will bump its head up against the 1800 level a few times.

Anals Home Cycle Tables Intraday Feed Dow Long Bong Hit SPX Nasgap Golden Stool Uncle Buck
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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.

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.

About centered moving average projections.

ABBREVIATIONS:

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

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