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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. (Just kidding, details to follow.) Warning - If you are not an experienced, independent, investor/trader with a sense of humor, capable of forming your own opinions, and making your own decisions, PLEASE LEAVE THIS WEBSITE NOW! Like all poodits, Dr. Stepan N. Stool, the stock proctologist, takes no responsibility for anything, especially if you happen to agree with him when he's wrong! Please See Disclaimer 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. Some time between now and March 15, 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 for a 3 month trial and $74 per year thereafter, in honor of the great bear markets of the 20th century. As always I thank you for your support, and I look forward to many prosperous years working together with you. Dr. Stepan N. Stool February 19, 2002
This weekend's comments are abbreviated, as Doc spent the weekend getting your new Stool Pigeons Wire up and running. Please check it out. Enjoy! No one says it quite like Doug Noland. "The leveraged Credit market players were bludgeoned this week. It also sure looked as if the “market neutral’ equity strategies – where speculators’ long equity positions are hedged with short positions and/or derivatives – ran amuck. And, yes, panic short covering does do wonders for the prices of many stocks and the market as a whole. However, such dynamics and this week’s dislocation should be a cause for serious concern and not celebration. In such an environment, today’s short covering can abruptly change to tomorrow’s panicked long liquidation." Doc finds Noland's analysis persuasive, because it squares with what Doc sees on the charts of stocks, bonds, and the Dollar. Last week's rally should be viewed in the context of increasing volatility and instability. The rally, however long it lasts will die a death as violent as the ground from which it sprang. The shorts suffered explosive diarrhea Friday morning as stocks opened on a huge gap up on the reduced unemployment news. The Nasty was the worst of the 3 major averages, of course, because it has the highest short interest. The fact that it close near it's high, while both the Dow and Portfolio Sphincters closed in the middle of the range is another indication that this rally has been driven by short covering. The Dow remained parked in the vicinity of its upside centered moving average projection for the 6-7 week cycle. But there's nothing on the chart yet that can be considered a sell signal. The overbought momentum is a necessary prerequisite, but a downturn in the index is normally preceded by a negative divergence in momentum, which has barely begun in most cycle time frames. Without some kind of bearish miracle, it will be at least a few days before these indicators roll over. What we don't want to see is the momentum correcting while the market moves sideways. That would indicate a significantly positive slope in longer term cycle channels. Of course, this only applies to the Turdy Thirty.
SPX Charts The stock proctologist's job is to always look deep into the cracks and crevices of Wall Street in the eternal search for the truth. The trick is to identify the trend. Sometimes it's not so easy. If it were, how difficult would it be to follow the dictum, "The trend is your friend"? Not very. The thing about trends, you see, is that they are all just facets of cycles of varying lengths. It is not simply a case of up or down, it is also a case of degree. Then there's the fact that some trends go sideways, but have very different implications depending on cycle phase. In their pursuit of their function, which is the distribution of stocks to the public, Wall Street likes to oversimplify. It's either a bull market or a volatile market. A "volatile market" is of course one that's going down. A bull market is any market in which prices are higher than they were a week ago. So this one they call a bull market. All those Wall Street jackasses who are so cocksure that this is a bull market, and that's just about everybody now except for a few grouchy old timers like Russell, and Mamis, and Doc, all those bulls haven't looked at this weekly chart.
Admittedly, this rally could just keep on going, and blow those downtrend up. But when one applies a little analysis, such as a linear regression channel connecting the dates of market highs for the past year the picture is a little different is it not? There's a huge negative divergence at this level versus the ;last time the SPX was here. The minor tick through the channels leaves room for doubt. Sure another blowout day would change that, but once a skeptic always a skeptic. The VIX, a sentiment indicator based on options volatility, closed at 21.61, continuing a string of readings indicting high levels of complacency. Doc has made the point many times that it's impossible to judge what is oversold in a bear market. By the same token, it's impossible to know what is an upside extreme in a bubble. If this is a new bubble, then the readings we are seeing are not extreme. We can only know when they are, after they have turned. The VIX is reported here because many Stoolies follow it. But price and price based indicators are always the final arbiter. |
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Doc did some fiddling with the cycle chart. No fair, you say! Why is that allowed? It is allowed, nay it is, verily, I say to you, yea verily, it is required, because cycles morph. That's why an indicator based on a fixed period will work for awhile, then suddenly it won't any more. In the search for the truth, we have to adjust our cycle indicators to fit the current market as it shifts. Once it has shifted, it tends to remain in that gear ratio for awhile, but we must always be in the lookout for signs of shifting. All of the cycle indicators are headed up at the moment, including the 6 month cycle. The cycle indicators may only be signaling a "sideways up phase", i.e. a trading range within longer term waves that are still descending at a very slow rate. A breakout above the December January highs would indicate an upward slope in the 12-18 month cycle. Actually that cycle has been in an up phase since the April ands September lows. This is a mature cycle, and the current action smells more like a blowoff top for the 12-18 month cycle, than a major bear market bottom.
The Cycle Conditions tables include cycle phase and 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. This is a fluid exercise, in other words, the projections are likely to be wrong, but they force us to be vigilant for key turning points, and frequently work well enough to prevent costly misreadings of the market. SPX Cycle Conditions as of 3/8/02
PTT - Periods Till Turn Nasdaq Charts When you see things like the weekly chart, you have to be skeptical.
The six month cycle oscillator has turned up. Will the up phase be flat or have a positive slope? Short term cycles are near a high. If the short term down phase is only a trading range, the next move would carry to 2150. But there's a helluva lot of resistance indicated in the 1950 area.
Here's a linear regression channel dating back to the highs of February 2001. Interesting fit
The Nas Fiber Nacho regurgitation chart shows that 1900 is a 50% retracement. The next level is 1950. Centered moving average projections say it won't make it.
Nasdaq Cycle Conditions as of 3/8/02
PTT
- Periods Till Turn Bork Attack! As we all know, the act of borking is what happens when a borkerage firm, analcyst, shill pumps a stock after the borkerage's trading arm has accumulated a ton of it, either by design, or by accident. Invariably, the borking itself causes the stock to top out, because everybody who had even the slightest inkling to buy the stock, panics, and they all jump in all at once. Goodbye, pent up demand, if there even was any. The result is always the same. You get screwed, or borked, because the guy managing your retirement finds is either too stupid to know better, or he does and doesn't give a crap, because, after all, it ain't his money! Doc will check back on these borkings every so often to illustrate the aftermath. Remember, ladies and gentlemen, stock borking is what borkers do. It's their business. Accumulate inventory, mark it up and move it out, just like any other retailer or wholesaler. They make money the old fashioned way, advertising, PR, and salesmanship! Which brings up a thought, perhaps the greatest borking of all time was when the NYSE's third largest specialist firm, Meehan, managed to bork itself to the dumbasses at FleetBoston at the top of the bull market! The deal was negotiated in late 1999 early 2000, and closed in July 2000. Now that was a borking for the ages! No Bork Report tonight. Stay tuned for Monday's edition. Golden Stool It's bad enough that bears got battered. Now the gold bugs look to be in a little trouble in the short run. We'll want to see the 77-78 area hold, otherwise we are in for months of more base building and consolidation in the low to mid 70's. Which would be ok, if we were talking about the weather. Owning gold stocks can definitely be a real pain. Even in a bull market.
Bond yields broke out, just like we thought they would, and pretty much when we thought. The 6-7 and 10-13 week cycles in bond yields are turning up. The 6 month cycle was in a down phase for three months. That resulted in a trading range. Expect to see the 10 year Treasury yield rocketing toward 5.75%. That will make stocks even more insanely overvalued. And just wait till yields get back to their historic norms of 6-9%. Hoo boy won't that be fun?
The dollar rallied off the channel line. It may flop around here for a few days. We'll have to see if it can hold within the channel or whether the downside mo indicated by intermediate cycle oscillator, rules. Talk about the Dollar on the Stool Pigeons Wire.
See you in Intraday Stool. Let us know what you think on the Stool Pigeons Wire. Archive |
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