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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
The Farting Old Men's Committee did nothing about interest rates, as expected. Here there was no news, and the market bought it. The poodits manufactured the excuse that it was due to the surprise 0.2% increase in GDP in the fourth quarter. Never mind that the gain was due entirely to a 15% surge in gummit spending. And never mind the thought that profits collapsed as GDP was rising. Doc's been guessing that the real decline in stock prices would begin when an apparent recovery in the economy began, because of the likelihood that the recovery would be "profitless." Obviously a profitless recovery can't be sustained, but a stagflationary no man's land can. And that kind of environment was what propelled the bear markets of 1968-74. But the portfolio sphincters were in no mood for negative thoughts after Monday's meltdown. Today was the day to claw halfway back. Was it a reverse Whopsaw, the inverted Finger formation, so dreaded by bears? Too early to say for sure. But unless the market can reverse all of Monday's loss, and then some, the answer is no, it's just more of the normal whipsaw processes that are so common in bear market distributive phases. Sentiment which had begun to crack early in the session, rebounded to levels indicating supreme confidence by the bulls that the recent wave of selling was nothing more than "this too shall pass." What really stoked the money mismanagers, and triggered another massive panic by bears covering shorts, was the following statement from the Farting Old Men's Committee: "Signs that weakness in demand is abating and economic activity is beginning to firm have become more prevalent. With the forces restraining the economy starting to diminish, and with the long-term prospects for productivity growth remaining favorable and monetary policy accommodative, the outlook for economic recovery has become more promising." There you have it. Houston, we have recovery! So where are the profits that supposedly drive stock prices. As stoolies know, it is not profits that drive stock prices, it's liquidity. So long as the FEED is feeding, and other financial intermediaries are creating liquidity in excess of what the economy needs and can use, the stock market rises. Thart's what happend through December. Over the last three weeks that hasn't been happening and stock prices have fallen. The FEED has stopped creating enough liquidity to support the market and the GSE liquidity bubble continues to flow to real estate. Now it's up to the portfolio sphincters alone to support stock prices. With the economy not generating new funds for investment - that requires profits - and the public neither able nor willing to fork it over, the sphincters are in trouble. They have only one pool of liquidity they can tap, the bond market. Their only choice is to sell bonds in order to buy stocks, which they will do, given "the recovery is here."
The Dowager Jones made a nicely formed Hunchback Formation (notice the weak, deformed right shoulder) over the last couple of months and broke down on Tuesday. Oops it came right back Wednesday, creating a reverse Whopsaw, and potential Upside Down Finger. In order for the Finger to be completed, the Dow would need to break Tuesday's high, and get back above 9900. The 13 day cycle is in a sideways up phase which is now 6 days old, and the up phase in the 4 week cycle appears to be going into day 11. So even though that blastoff in the afternoon came off a price low, it was probably actually a blowoff of those two cycles. We'll know for sure on Thursday when the rally fails to extend. Nothing to worry about. Heh heh. SPX Charts The VIX melted up to 30 in the AM selloff, and fell right back down (inverted on chart) in the PM rally. This behavior is typical of the kind of distribution phase we saw last summer. Unlike the Dowager, the Sphincters' Index was unable to complete its reverse Whopsaw. In other words, the market managers were able to move the Dow, but they weren't able to move the mass of the big cap stocks. The Generals are out there leading the charge by themselves, and the troops refuse to follow. There's no sign of a meaningful upturn.
The short cycle just topped out. The reaction rally to the point of breakdown is a normal occurrence. The 10-13 week cycle remains weak.
The SPX rallied off a 38.2% fibbing nacho retracement level, and a downtrend channel line. Hey, this chart was here yesterday! Living proof that a chart will always predict exactly what the market will do!
Nasdaq Charts The Nasty bounced off a little double bottom. Chartists just love those tight little double bottoms. Buy 'em every time they're flashing. Nothing like a nice full moon to get the speculumator's juices flowing. But alas, the short cycle is topping out, and the 10-13 week cycle is heading down. This is just a little bounce off the lower channel. That wave will begin to steepen to the downside in February.
Sucktor Watch Here's for you dirty SOX people. Is that another Hunchback forming? Beware the Hunchback! Give it a day or two for the short cycle to top out. The next down should break the lows and complete the top.
Mafiasoft's intermediate wave has rolled over, but in the short run, the manipulators will probably attempt a rescue. It will be weak and short lived.
Untel is another one taking its time building a top. Distribution started in November. This could continue awhile. The breakdown probably won't come until late February or March.
Nasdaq Cycle Conditions as of 1/30/02
L-Low,
H-High SPX Cycle Conditions as of 1/30/02
See you in Intraday Stool. Let us know what you think on the Stool Pigeons Wire. Archive
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No
doubt this game of rising interest rates, non-existent corporate earnings,
and the buying of stocks just enough to keep the market from falling apart
can go on for awhile. But it cannot go on indefinitely. Push will come to
shove, and the market will break. 
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