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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 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 a great week! The Dowager lost 215 points, the Nasty was down 92, and the Portfolio Sphincters' Index was off 18. Friday took back all of Thursday's gain and then some, most of it before the market even opened. Bulls fought an all day holding action at levels formerly known as support, but caved late. There was a jam in the last 15 minutes, but at the bell, the jam was toast, and prices closed just off their lows, at Dow 9771.85, Nas 1930, and SPX 11.27.58. Prices descended last week in spite of the fact that the 8 day, 13 day, and 4 week cycles "should" have bottomed. The fact that they didn't, tells us that longer term cycles are heading down, and are in control of the action. The market's illiquidity was stunning, with huge gaps in opposing directions the rule rather than the exception. I suspect that this will only get worse in the days and weeks ahead as the market begins an historic, monumental collapse. The Enron explosion is still ongoing. The mushroom cloud is growing, and the extent of the fallout can only be guessed. Its impact on the market and the economy has barely been felt. In the final analysis, this deal is going to make the LTCM situation look like a Sunday School picnic. The side of the Enron mess that we can see is only the tip of the iceberg. The real trouble is in the daisy chain of financial instruments and relationships between Enron, it's multifarious off-books limited partnerships, and its lenders. This is an enormous imploding Ponzi scheme, swirling into a huge vortex that is sucking the stock and credit markets into its eye and destroying them. In spite of the FEED's furious pumping, it has been unable to overcome the sucking. The money supply is no longer expanding and the markets are sinking into the abyss. The reason is the Enron vortex. The draw down has only begun. SPX Charts The weekly charts continue to show the market trending down at about the same rate that was established beginning in 2000. Other than the 1/11 anomaly, the trend has been consistent. Now, for the first time, there's also clear evidence the secular trend (pink channel) has turned down, although it's too early to judge the slope. We can probably expect the index to break well below the lower linear regression projection of the channel, remaining within the 200 point wide, green channel which represents the 4 year cycle. The 12-18 month cycle up phase (brown lines) was only a slight slowing in the downtrend. That's over, and the wave should accelerate toward the lower projections of the 4 year cycle and linear regression channel (blue), in the months ahead.
The daily chart shows the VIX indicating that the level of complacency is still consistent with a top. The real decline hasn't even begun. Momentum just gradually weakens. The index remains at the top line of the downtrend channel. Dramatic down days lie ahead. This is a picture of a market that's ready to fall a long way.
The chart below suggests the possibility of a pause in the decline this week as the short cycle tries to turn up. That's a slim straw for bulls to hang their horns on. Everything else points down, and the underlying forces are not going to allow for much of a bounce. The up phase, if it manifests at all should be no more than a barely visible slowing in the downtrend, and the possibility of a big gap down to break out of the top pattern is very real..
Nasdaq Charts The Nas weekly chart also shows the beginning of a downward tilt in the secular trend channel. The 12-18 month cycle is at a top, similar to the one that formed in March of 2000. The intermediate cycle, 5 to 10 months, is just beginning to turn down, heading back toward the low end of the 4 year cycle channel (green).
The daily chart below shows the index beginning to fall back within the 12-18 month cycle channel as intermediate waves top out. The short cycle indicator is near or at a low, but prices could crash with the indicator at this level for 4-5 days. That's what happened in September, so it pays to remember that there's no such thing as Dover Sole in a bear market, because bears eat the Dover Sole. Still, the Nas is still in a top pattern, so another weak bounce can't be ruled out. If it breaks the 1900-25 level, forget it. We'll probably know before Tuesday morning based on what the futures do.
Mafiasoft is our weekly stoolwether chart. It's pretty similar to the Nasduck, basically because it is the Nasduck, considering it's weight in the index. The stock's headed for the mid-40's intermediate term, and that will turn the secular trend channel lower. This is something like what Xerox and Polaroid looked like in 1973. Nothing like a good old fashioned monopoly to undermine long term portfolio sphincter performance.
Stool's Gold Here's for you gold bugs. The one year cycle is in a sideways down phase, in other words, a consolidation before the next leg up. Short term, there's pretty decent downside risk here, to the mid to low 60s or so, which means another good entry point coming up in a month or two.
The daily chart of the yellow stuff suggests a short and intermediate down phase is upon us. It should manifest as a consolidation.
Nasdaq Cycle Conditions as of 1/18/02
L-Low,
H-High SPX Cycle Conditions as of 1/18/02
See you in Intraday Stool. Let us know what you think on the Stool Pigeons Wire. Archive
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