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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
Friday morning I got a call from Japanese Finance Minister Masajuro Shiokawa. He wanted to know my ideas on the Japanese stock market's problems. I spent several minutes chatting with him, explaining stock proctology as it applies to the Japan's stock market. When we were finished Minister Shiokawa thanked me for my opinion, and bid me goodbye. Later, he issued the following statement to the international financial press: Japan "must stop [the market slide]… it is outrageous… The market is loosening and loosening like having diarrhea. Japan has become a gambling house for short sellers." When short sellers here in the US saw this statement crossing the wires, they became so worried, they began taking profits, covering their short positions en masse.
By now you have read all kinds of explanations, excuses, and interpretations pertaining to this rally. Now you know the true story. The question on the minds of bears is whether this little squeeze is going to turn into something more significant. At this point it certainly doesn't look that way, but another day that closes with strong gains could change that. Short covering rallies in bear markets are the mirror image of profit taking in bull markets. They're scary, but they usually don't last long, and they don't disturb the trend. Meanwhile there's nothing wrong with taking something off and stepping back from the table For now this appears to be no more than a short cycle bounce fed by an upturn in the 13 day cycle, and what appears to be a sideways up phase - a consolidation - in the 6-7 week cycle. The conventional wisdom among portfolio sphincters is characterized by this quote that Robert Robbins, chief investment strategist at SunTrust Robinson Humphrey gave to Reuters: ``It looks like the accounting concerns, with regard to the biggest-cap companies like GE, Tyco, are subsiding, and as such, the bears are going to be hard-pressed to keep this issue rolling.'' Then there was Steve Case's loudly announced purchase of a million shares of A HOL Time Wastin. Here's what a sphincter had to say about that: ``Steve Case buying back AOL stock with his own money sends a very positive signal to investors,'' said Erik Gustafson, a manager at Stein Roe & Farnham Inc., which has $30 billion. ``It's recognition from a person who would know best that his company is undervalued.'' Pardon me while I vomit. This "insider confidence" trick is as old as the hills, dating back to the Crash of 1929. It is an attempt to manipulate the public through the media. These purchases, if indeed they are even carried out, are meaningless in the big picture. Finally, the VIX, a sentiment indicator related to options volatility, dropped immediately back to levels indicating extreme complacency, as soon as the market rallied Friday afternoon. As long as this kind of mental institutional denial is all pervasive, the market cannot mount a meaningful rally, let alone put in a bottom. My guess, based on cyclical patterns, is that we'll see a a couple days to a couple weeks of choppy sideways movement. The upside should be limited to a few per cent above current levels and the market should continue to have a downward bias. The probability is that the next two weeks may not be conducive to the 1000 point down day, but it can't be ruled out either. The Dow is still stuck on the Hunchback's neckline, which is one of the reasons for all the furious posturing. Once the hunchback falls over, he can't get up. So the Big 3 who control the Dow, and all other interested parties, continue to paint a pretty picture in the hopes of camouflaging the fact that the market overall is a disaster.
As far as the Feed is concerned, Al and the FBI* were relatively inactive last week, adding a net of only 143 million to outstanding repo agreements and just over a billion to government securities held outright. M1 is down by 10 billion over the last 4 weeks and M3 is up 33 billion. Something is creating credit excess. It does not appear to be the Fed. Might it be Fannie and Fred? No wonder the real estate bubble is alive and well. Over the next 15 days, 23 billion in Fed repurchase agreements are coming due. On average, the Feed will need to add $11 billion per week in repos just to maintain the status quo. Given the liquidity needs of a financial system in crisis, they would have to add a helluva lot more than that to move the stock market. It ain't gonna happen. The bond market has stabilized some as 13 week bills have moved up in yield from 1.54 to 1.70 over the past month. Bond traders are watching the Fed for signs of inflationary monetary ease. The Fed will do its best to keep bond yields at bay by cooperating with that market. The stock market is secondary, at this point. *Financial Bubble Inc. |
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SPX Charts The weekly chart of the SPX shows a market in a long term secular downtrend, with no sign of an end any time soon. The only question is what will ultimately be the slope of the long term channel, in pink, which just turned down over the last four weeks.
The VIX is back in top territory, signaling that portfolio sphincters and other bulls still have their heads stuck... uh..., in the sand, yeah that's it. Mo continues to head gradually south. There's no sign of a meaningful rally here.
Likewise with the cycle picture. No sign of a big rally here either.
The fiber nachos suggest that the market's diarrhea will cause a reflux up to either 1101, or if things get really crazy, 1116.
The cycle charts have a new feature, 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. Is Doc a wild and crazy guy, or just a glutton for punishment? SPX Cycle Conditions as of 2/8/02
PTT - Periods Till Turn Nasdaq Charts This is a weekly picture of the Nasty downtrend. The Nas has been in an 18 month cycle up phase since last spring. The September collapse probably would not have happened in the absence of the terrorist attack. It was an exogenous non-cyclical event which exacerbated the tail end of an intermediate cycle downtrend. The up phase only recently topped out. If that was the up phase, I can't wait to see the down.
The short cycles signal that the Nas will try and consolidate around current levels for at least a few days. That's all. The red channel may, in reality be sloped down more sharply than drawn. Do not mistake the wave edge band for support. It's just a red line on a computer screen.
Nasdaq Cycle Conditions as of 2/8/02
PTT
- Periods Till Turn Golden Stool Now that gold has made it back to the front pages, this phase of the rally is probably in its final stages. But this is a fine looking chart. Gold prices are not going to collapse the way they did after the last two big rallies. They will pull back and then advance again. As for when the pullback will start, what do I look like, the amazing Kreskin?
Dollar Death Watch This is a tough one. How long can we bears buck this trend? I say four more weeks. If the buck is under 120 four weeks from now, regardless of what it does in the interim, that is probably the final high. But if the dollar strengthens again with long term mo confirming, the dollar index will see 130 and higher. Seems unthinkable. In fact it is. It's finished.
Long Bong Hit The Fed has eased off the gas in the last six weeks, and suddenly the bond market is not so spooked. Yes, yields have made a long term bottom, but the 10 year yield is probably going to consolidate in the 4.75 to 5.0 range for a long time, before the next big move up.
See you in Intraday Stool. Let us know what you think on the Stool Pigeons Wire. Archive
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![[Most Recent XAU from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_nasdaq_en_2.gif)
![[Most Recent XAU from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_sp500_en_2.gif)
This was the result.
Chart Powered by METASTOCK (Sorry about the bull.)
