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The Anals of Stock ProctologyPublished 5 times
per week by the American Academy of Stock Proctology and Available by annual subscription for $1929 or free Welcome to the The Anals of Stock Proctology, the new scholarly journal of the American Academy of Stock Proctology, edited by the world famous founder of the study of Stock Proctology, Dr. Stepan N. Stool PHandD. The Anals replaces Capitalstool's nightly and weekend updates of the major stock indexes. Now you can get your nightly stock proctology report in one convenient, uncluttered page, right here. The Anals will be available for free, for the immediate future. Soon, however, all advertising and solicitation will be removed from the Anals, and access to the Anals will be restricted to subscribers. As a result of the clean format, the Anals will be readily printable for reading in locations more appropriate to such endeavors, such as, uh, the kitchen table. Yes. The remainder of the site, including The Stool Pigeons Wire, IntradayStool, Stoolhoo, and Stoolchat, will continue to be free. You will never have to pay for access to these pages. Previous contributors to Capitalstool will receive a free subscription period. Prior to going to a subscription format, the voluntary pay buttons will remain. So feel free to contribute now. Your contribution will result in a full credit toward your future subscription. Several of you have already contributed in excess of $500, and you will receive a free lifetime subscription. Contributors of written content or illustrations used on the Capitalstool front page will also receive free subscriptions. That includes all who achieve the level of Professor of Stock Proctology on the Stool Pigeons Wire. Initial subscription rates will be $19.29 quarterly or $74 per year, in honor of the great bear markets of the 20th century. Actually, 1937 was pretty bad too, so the Academy may offer a half year subscription for $37. Latecomers will be able to get a one time, one month trial for, what else? $6.66. As always I thank you for your support, and I look forward to many prosperous years working together with you. Happy New Year to you and to Bears the world over! Dr. Stepan N. Stool December 30, 2001
What They Want You To See, And What They Don't (2/1/02) Another wild and woolly week of crazed volatility ended with a whimper on Friday. Around mid-week, when the market pulled up from the brink of disaster, we witnessed an amazing transformation. Bulls turned into wild hyenas. Their hysteria, and refusal to accept reality, manifested itself in a huge window dressing jam on Wednesday and Thursday. By Friday, they had nothing left. The Dowager Jones lost just a couple of points to close at 9907. Considering that the Dow was nearing 9500 on Wednesday morning, it was pretty amazing. The chart is forming Bulloney Bullhorn Patterns all over the place. (Scroll down a bit). This is an echo of the huge Bulloney Bullhorn the Dow made in the major top formation of 1999-2000. The Dow is really useless as a market indicator standing alone. It consists of 30 stocks controlled by 3 specialist firms on the NYSE, LaBranche, Golden Sacks, and FleetEnemaBoston. The lack of liquidity in the Dow lately is a clear sign that Fleet in particular is having big problems keeping its crap together. Fleet took it up the you know what, on Enron, and is now having to deal with the instability of JPM, and GE. This means huge trouble for the Dow. You can think of the Dow as what the Wall Street insiders want the public to see on national TV every night. It's why the 10,000 level is so important. It may mean nothing to us chart boobs, but to the mass of sheeple out there, the farther this thing falls below 10,000, the less and less control the market insiders are going to have. The public will simply take their toys and go home. This week's instability is a sign that things are coming unraveled, that the Big Three are rapidly losing control over what happens next. True, the 30 Generals staged a miraculous recovery, but the troops are falling farther and farther behind. The S&P's performance was far weaker than the Dow's. Eventually the Generals will retreat with their army, and the public will stampede toward the exit.
We spend a lot of time around here thinking about the FEED's impact on the stock market, day to day. But just how impotent is money, in moving the markets. The bulls have hung their balls on the liquidity argument as their reason for bullishness. Don't fight the Fed and all that crap. They think it's really important, and we knows it's impotent! So how impotent has all that freshly made moolah been in getting the market to rise? Definitely impotent. But perhaps it has stiffened the market a bit, but that's all. The chart below shows monthly percentage changes in M1 and M3 on the right scale, and the monthly close of the Portfolio Sphincters 500 Index on the left. The Feed has greatest impact over M1, the blue line. Fannie and Freddie, through their unlimited ability to create mortgage credit, which gets recycled through money market funds have the greatest impact on M3.
Looking at M,1 the FEED clearly panicked following September 11. Then they lost the handle. It now looks like they have completely lost control of a monetary system careening wildly from one extreme to another. The Fed's panic bought them next to nothing in terms of stock prices. The question is, where the hell is all that money going? Answer, the black hole of the derivatives market implosion. It sure isn't helping the stock market. The FEED can pump all it wants. It won't help stock prices. Now look at M3. M3 has been cycling around a 10%-15% rate of growth. But there are signs of trouble. Excluding the post 9/11 spike, the rate of growth has actually been declining, and is recently in single digits headed for the big fat zero. The problem here is that bond investors, worried about inflation risk, and credit risk, are demanding, and getting higher yields on all kinds of longer term instruments. That includes mortgage backed securities. As mortgage rates rise, the level of refi activity declines. It is that refi activity that has fueled this credit bubble. The Fed is no longer able to stimulate by lowering interest rates are adding aggressively to the monetary base. Bond investors will have none of it. The black hole of derivatives implosion is beginning to destroy money at as fast a rate as it can be created, regardless of the mechanism. The game is over. The unwinding of the credit bubble has begun. |
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SPX Charts The long term trend is down. The intermediate cycle has topped out and is headed for the lower band of the long term wave. This process should last the better part of this year.
Sentiment as gauged by the VIX remains at levels indicative of a top. The massive 3 month top is beginning to break down. Momentum is declining, but is still in neutral territory. It can fall a long way.
Short cycles, less than 7 weeks, have been in a "dreaded sideways up phase," i.e. a consolidation before a big drop. Cycle patterns are similar to where the market was in August, only weaker.
SPX Cycle Conditions as of 2/1/02
L-Low,
H-High Nasdaq Charts The Nasdaq is completing a 12-18 month cycle up phase. The last 9 months will look like a Sunday School picnic, compared to what lies ahead. The move ahead should be similar to the one from July 2001 to March 2001, and should lop off two thirds of the Nasdaq's value.
The short cycle is just beginning to top out. Prices remain at the top of the long term wave band. Intermediate waves are only beginning to roll over. The breakdown lies ahead.
Again, this looks a lot like last August. The short cycles are just topping out. The 10-13 week cycle has been in an extremely weak up phase.
Nasdaq Cycle Conditions as of 2/1/02
L-Low,
H-High Golden Stool The gold stocks look to be in the midst of a powerful breakout.
Walmart 's weekly chart gives a better perspective of what this stock is up against. That breakout last week should fail. But portfolio sphincters with nowhere to run may try to hide here for a few more weeks. Keep an eye on this. If it starts to crack, you know the market is finished.
GE's the most widely praised, widely loved, widely held, institutional darling. One look at this chart will tell you that it's going to be responsible for extraordinary wealth destruction, since everybody owns a mountain of it. But it's such a slow mover, nobody will notice the trouble it's causing until after it's over. Look for 25 by the third quarter. Maybe worse, depending on how bad things get.
See you in Intraday Stool. Let us know what you think on the Stool Pigeons Wire. Archive
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