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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
Last week was turnaround week. Options and futures expired, Ken Lay took the fifth, Sherron Watkins pointed the finger at Skilling and Fastow, IBM cooked its books, Tyco lowered guidance, gold stocks held their ground in spite of some heavy handed reverse borking, everybody started to wonder again how many more Enrons might be out there, and some even wondered if all of the profit growth from the late nineties was a sham. It was all in all, a fine week for the upstanding bears of the world. But, as the hourly bar charts at left illustrate so well, there was still more than enough fraud to go around, in particular the fraud now known as the Dow Jokes Stage Managed Index. The act of upticking the Dow by 2 points to 10001, two minutes AFTER the bell on Thursday was both a farce, and a fraud designed to mislead the public. The market is a helluva lot sicker than the Dow indicates. The question is why the Dow cartel even bothers. When the sheeple open their mutual fund statements and see their retirement dreams smashed, they know the market sucks. But hope springs eternal for the common man, conditioned by a twenty year bull market, so he goes on with life in denial, with his head placed firmly in the sand. People simply refuse to believe that stocks can go A LOT lower, which they will, and soon. Because of the public's misplaced hope, stocks will go down on ever diminishing volume over time, while the systematic destruction of wealth continues. The velocity of that destruction is about to increase dramatically, as the market begins to enter a period of alignment of multiple downside cycle phases. The mental institutions in charge of ruining your retirement are fully invested, having gotten that way in the belief that the post 9/11 selloff marked the bottom of the market. They maintained that belief throughout the last three months while the market was building yet another enormous speculative blowoff top. A review of poodit comments in the early part of the week revealed nearly universal bullishness - unbelievable in the face of what's been going on out there. The bullish chorus, under the direction of Joe the Butthole, and Abby Justa Colon, just drones on and on. They spit and drool over the economic recovery, and forecast strong profit growth, that at the same time is supposed to surprise everyone. And they point over and over again to "all that cash on the sidelines." Well, Dr. Stool says, screw that fictitious cash on the sidelines. The public has neither the will, nor the wherewithal, to put any of it into the market. And if the profit recovery is going to be such a surprise, why is everyone forecasting it? The wildly bullish noises made by the sphincters is a function of them putting their mouths where your money is, stuffed up the butt of this stinking rotten market. So with the sphincters fully loaded with stocks, there is only one way for them to go. Down the toilet. Over the next few weeks we are entering a period where it appears that all significant short, intermediate, and long term cycles may be headed down at the same time. The major cap weighted averages are still near the upper band of long term trend channels. The necessary conditions for a crash are once again in place, and the countdown has begun. The judge overseeing the Mafiasoft case, this weekend ordered the world's largest criminal organization to turn over its Windows source code to the 9 states continuing to pursue the case. It will be interesting to see if this is enough to push the market over the edge. If it isn't, there are other blows coming, count on it! Weekend Pooditry Here's a sampling of Friday's poodit sentiment along with a little Stool editorial comment. We're still churning and working off the overbought conditions reached in late December. [Holdin' and hopin'.] Nobody is willing to come off the sidelines. Skittish psychology takes time to heal. [Yeah, like 30 years. Some people have learned their lesson.] Eventually the good news will overwhelm current worries and rekindle interest. [Another holdin' and hopin'] The question remaining is not when the recovery will come, but rather what the slope of the recovery will be in the second half of 2002. [There you go again. No question about the recovery.] A company could have great earnings numbers, but any whiff of accounting problems and bingo, it's all over. Right now, you can't own stuff and sleep well. You can only go to bed and say 'Wow, I hope I made the right decision. [Badda bing, badda boom, you screwed up!] If they can show that the light coming at the end of the tunnel isn't a train, investors will reward these types of companies. [Yeah, meanwhile, you just stand there on the track, you dufus.] People are trying to get incremental data points to support a positive view. [Holdin' and hopin'] Still, because of accounting issues, we're still in a holding pattern. [Holding pattern is anything less than a 20% decline.] Money managers shoot first and ask questions later. They want to avoid controversy. [As long as everybody else is doing it, I better do it!] Quarterly reports to the Securities and Exchange Commission will be scrutinized as never before. That'll put a lid on the market. [ A lid? More like a sinkhole.] Right now, people are more inclined to own blue chips than speculative stocks. It's a little bit of a valuation play. [This guy noticed the Dow is stronger than the market. He thinks it's because of "valuation." Try "manipulation."] You don't want to sit here going long with stocks and have something happen over the weekend. [Long term view.] Accounting concerns, because of their heavy publicity, have already done about as much market damage as they are going to. That probably suggests we're close to the bottom. [Typical market strategist BS. Because the news is bad, it must be the bottom.] So there you have it. Suddenly from all that wild enthusiasm earlier in the week, what we hear is hope and confusion, but not a hint of outright bearishness. The market can fall a long way as the tide of attitudes changes ever so slowly. Reality is rearing its ugly head, but the crowd simply refuses to see it. |
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The Dow Jokes reversed course Friday after reaching the 4 week centered moving average projection and the top of the Bulloney Bullhorn. Short cycles have topped out and intermediate momentum remains weak. Now that we've seen the top of the Bullhorn, the next stop is the bottom.
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The money supply has stopped growing. The adjusted monetary base, which is
driven by the Fed, is flat over the last month, and down since September.
Ditto for M1, which is directly influenced by the Fed. M3, which is more
directly related to growth in the GSE credit bubble, i.e. mortgage
creation, is also flattening as the refi bubble winds down. We are
witnessing the beginning of the collapse of the credit bubble economy.
None of the growth in money has helped the stock market over the long haul. Clearly the conventional wisdom, don't fight the Fed, is dead wrong. Furthermore, a shrinkage in money will go hand in hand with the coming stock market disaster. Last week, the Fed was actually tight, as they struggled to try and bring down yields at the long end of the market. They increased their outright holdings of government securities by only a half billion, and actually reduced repos by 2.1 billion. Over the next two weeks 19 billion in repos come due. The Fed will need to rollover that amount to just keep holdings level, and substantially more than that to meet the needs of a banking system in crisis. All of this is extremely bad news for the stock market, which is now the least of the Fed's worries. |
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SPX Charts On the weekly chart, the SPX is about a third of the way down in the 4 year cycle channel. The big question is what will be the ultimate rate of decline in the secular trend. We won't know until later this year when the next important cyclical low is established. The important thing is that the current decline is just getting started. A lot of people are looking for a low in March-April. Don't count on it. The late third quarter is more like it.
The VIX continues to signal ultra complacency. Ignore the spikes - bad data. Momentum is extremely weak. A downturn from this level is a portent of a crash. It could start at any time within the next two weeks.
Short term cycles have topped out, and the 10-13 week cycle has been in an extremely week up phase for a little over two weeks. With momentum as weak as it is, that up phase could be truncated, and followed by an extended down phase, lasting well into April or even May. By then, the index should be at the lower end of the channel.
The Cycle Conditions tables 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? Actually, this is because I miscounted the last 13 day cycle, and was a day late and a dollar short at the low, looking for it on Monday, instead of Friday. That's no excuse, because 12 days is close enough, but this will force all of us to be a little more vigilant. It will still be wrong most of the time, but a little discipline can't hurt. SPX Cycle Conditions as of 2/14/02
PTT - Periods Till Turn Nasdaq Charts The weekly chart of the Nasdaq looks even worse than the SPX. The probability of a crash is high.
The daily cycle picture is very much like last August. The probability of a very sharp break imminently is high.
The similarities to last August , and the distance the market could fall are clear on this chart.
Nasdaq Cycle Conditions as of 2/15/02
PTT
- Periods Till Turn Golden Stool Gold is beginning a consolidation of its uptrend. The intermediate trend is extended, BUT there's no such thing as overbought in a bull market, especially in the early stages, which this one is. The corrective phase should be no worse than sideways, and the 6 month cycle indicator could correct even if the price continued to drift higher.
Stoolwethers Back on January 10, after the stock had closed at 122, here's what I had to say about IBM:
And here's the chart today. Note that my opinion hasn't changed. For the past year the stock has been in an enormous top. Within a few weeks, it will break out the bottom of this range.
Long Bong Hit On the weekly chart, it's still not clear that bond yields have turned the corner. This is an epic turning point. Although the long term indicator has signaled a bottom, the intermediate indicator is heading down. If the 10 Year yield remains in the 4.75 to 5.0 range while the intermediate down phase, yields will explode higher later in the year. On the other hand a retest of the lows can't be ruled out. A drop back toward 4.50 would signal that something was terribly wrong in the economy and the financial system. Which it is.
See you in Intraday Stool. Let us know what you think on the Stool Pigeons Wire. Archive
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