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Stoolies- See Subscription Information Above! The Day The Earth Stood Still( 3/19/02) Al and Company sat on its hands
today. They did nothing in their meeting, announced nothing, and did no
feeding again today. With an overnight repo of 4.5 billion rolling
over from Monday, they actually drained reserves. Meanwhile, we've seen
the adjusted monetary base, M1, and broader measures of money all stop
growing over the last couple of months. Now correct me if I'm wrong, but
aren't we supposed to be in a recovery? And doesn't money grow in a
recovery. Or I guess maybe we have enough of it sloshing around out there
that we don't need any more. When one looks at loan demand and lo and
behold, this is what you see. In that light, the Fed's action and statements today were, as always, a sham. Their words are designed to manipulate the markets, but it won't work. Bond yields will continue rising, earnings will not improve, and the divisor the portfolio sphincters use to make the excuse that stocks are not overvalued will rise as well. At that point it will become painfully obvious to them that stocks are overvalued, and they will pull in their pointy little horns, and some of them will start to sell, just enough to send the market careening lower. Meanwhile the Fed will be unable to feed the market. The fact that they've been notably absent of late is ample testament to that. They know that any further aggressive money creation will be met with a collapse in the bond market. Under the circumstances, they have no choice but to wean the stock market off the constant monetary support, and let it fall of its own weight. That process is going to begin any day now. The Dow Jokes Inflatables rose on the strength of another opening gap, spending the rest of the day treading water. The index continues to flirt with its 6-7 week cycle centered moving average price projection. It is close to the end of the line, but that end won't be confirmed until the first down day that takes the 17 and 28 day rate of change indicators below their smoothing lines. The futures are drifting lower tonight, and the wild and crazy Nick Me is down 165 the first couple hours. Maybe Wednesday will be the day.
Portfolio Sphincters Index (SPX) Charts The VIX, a sentiment indicator based on options volatility, closed at 20.35, down from 20.75, at the lowest level since June 30, 2001. This indicates extreme complacency, and was a number that when last reached, preceded a devastating decline. However, the churning persisted for weeks before the real drop began. Doc does not give much weight to sentiment indicators for timing purposes because it's impossible to know what is the ultimate "extreme", and how long the "extreme" will last. But over the past four years, when the VIX has dropped below 20, a devastating decline has always followed within a couple of weeks. We are getting very close to that threshold. The question is how close is close enough, and can we rely on that precedent? Price, and price based indicators are always the final arbiter. We see major negative divergences on the charts, going back months. If this thing turns down before the divergences are resolved, these rallies have been nothing more distribution. That is Wall Street's business, and they are masters of it. The resistance at 1180 still looks formidable, and when the 17 and 28 day rate of change oscillators turn down, a reversal will be confirmed. The recent strength in the Sphincters has been largely from the tremendous rally in the energy sector. Not usually a good sign for the rest of the market. |
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Intermediate cycle indicators are still headed up, but short term cycles have turned lower. The 1 year cycle up phase has been under way since the September 2001 lows, and is now making a second top. This is not a new up cycle. It is a mature one, and the recent rally acted more like a blowoff, than a new bull leg. But the top building process may take weeks. The upside centered moving average projections indicate a high in the range of 1180 to 1210.
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 3/18/02
PTT - Periods Till Turn Nasgap Charts The six month cycle oscillator turned up in the Nas but it remains weak and in negative territory. This indicates an extremely weak up phase, and it could be a precursor to complete collapse several weeks from now. Short term cycles have turned down, and centered moving average projections around 1950-75 have been met. The short term down phase is likely to manifest as a range. It will be at least several weeks before all cycles get in gear to the downside.
There are fiber nachos at 1950, 1900, 1850, 1820 and 1800. They'll probably stay stuck between 1850 and 1900 for awhile. Good time to take a vacation.
Nasdaq Cycle Conditions as of 3/18/02
PTT
- Periods Till Turn Stoolwethers Everybody's
waiting for the vote to come in. But the market jury has rendered its
verdict. Guilty! The chart shows a breakdown from the rare, but not
unusual two headed hunchback with weak right shoulder. Short term, a
bounce is due. Let's see what they can muster. Golden Stool The intermediate low looks like it's beginning to form.
There's a short term down in yields here, but the intermediate cycle has turned up. Bond yields are headed higher, regardless of what the Fed does. They may mark time for a few days, but the next upside move will be explosive. Should be interesting to see how the stock market likes that. This reminds me of 87. Bond yields bottomed and started rising sharply in May. The stock market crashed in October, five months after the turn in the bond market. It's been four months now since bond yields bottomed.
The dollar rallied a bit. Strange as it sounds, this looks like an intermediate cycle low, but I think it's a fake. Either way it breaks out of this 117-118 range should see a sustained move. 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. |
![[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)
Chart Powered by METASTOCK (Sorry about the bull.)
Chart Powered by METASTOCK
