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[paid/menu.htm] 10 Minute Bar Charts 3/26/02 Dow Jokes Inflatables
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The Anals of Stock ProctologyPublished 5 times
per week by the American Academy of Stock Proctology and Free trial access to the Anals will end on March 31, 2002. To access the Anals on or after April 1, you must subscribe. When you subscribe through Paypal, you will immediately receive a user name and password which will allow you to access the current issue. If you have previously sent a donation through Paypal, and you would like a complimentary subscription equivalent to the amount of your contribution, send an email to [email protected]. Include your name, your email address, and if possible the date of your contribution(s) through Paypal. Upon confirming your information, I will send you a user name and password. Allow 1 week for processing. By requesting and accepting a complimentary subscription, you are agreeing that you have read and agreed to the Terms and Conditions, which basically says that you can't sue Dr. Stool, or Capitalstool.com, or its owner, no matter what! (If you emailed me this week, thank you! I will send your user name and password this weekend.) Finally, if you prefer not to use on-line payment, you can subscribe by mail. The annual subscription rate for payment by check is $99.00. Print the subscription form at the bottom of the Terms and Conditions and mail it in to the address on the form, with your check, of course. I will email you a user name and password. Allow 2 weeks for processing payments by mail. Thank you for your support! Doc Stoolies- See Subscription Information Above! The Confidence Game ( 3/26/02) The Tuesday morning release of the Conference Board's Consumer Confidence Index illustrates again the stock proctology principle of the market as dog chasing tail. The market exploded upward instantly on the release of the much stronger than expected numbers. In fact, there was even an intraday gap at the instant of the release. (How is that possible?) So let's stop and think about this for a minute and ask ourselves a few questions. The first question is, "When was the survey taken?" That information was not provided, but the survey covers 5,000 households, so let's assume it takes a few weeks to survey everybody and produce a report. So the survey was probably taken in the first and second week of March. It is, after all, the "March" CCI. Now lets see what was the Dow Jokes Inflatable Average was doing in the 4 weeks after the prior survey? Well, what do you know! It was up. And it was up by nearly A THOUSAND POINTS! This was accompanied by a raft of positive data on the economy in February. On the nightly national news broadcasts in the days leading up to the survey, and perhaps even in the background while the survey was taken, was the TV news proclaiming that the poodits were calling an economic recovery, and a bull market in stocks. And today the market acted surprised that consumer confidence was up so strongly. This was a case of the market reacting to the people, reacting to the market, reacting to the economic statistics of January and February. Now I ask you, "What exactly does this have to do with today, and the outlook for the weeks ahead?" Answer- absolutely nothing. Ok, it does tell you this. A dog chasing its tail goes nowhere, and eventually runs out of energy, collapsing in a heap. Meanwhile, we look at the commodity indexes and the behavior of the bond market, and energy prices, and we see the beginnings of inflationary pressures resulting from the Fed's sponsorship of excessive monetary growth. Now, because those pressures are building, the Fed must sit on its hands and begin the tightening process. The bond market gave the Fed its marching orders over the last two months. A financial system starved for liquidity is being given a starvation diet from by the FEED, just minimal overnight repos, and rolling over of expiring longer term repos and treasury securities held outright. That's why the rally fizzled today. It cannot advance without the support of ultra easy money flowing directly into stocks. That's why the market will make no further upside progress, and why in the months ahead it's heading lower. The dog chasing its tail will eventually give up the chase.
Portfolio Sphincters Index (SPX) and Sentiment The VIX, a sentiment indicator based on options volatility, closed at 19.75, down from 20.48, again at the lowest level since August 31, 2000. The SPX dropped 15% in the 6 weeks following that reading. However, that was after it had stayed below 20 with the market churning for 2 weeks. The index has been at or below 20 for three days. The question is, can we rely on the precedent? The indicator has only "worked" for four years. Four years is not much history. But the level of animal spirits seems to match what's going in with this indicator. Price, and price based indicators are always the final arbiter. We see negative divergences on the charts going back months. If the market 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 17 day rate of change, a proxy for the 6-7 week cycle, is headed down. The 29 day rate of change, representing the 10-13 week cycle, is still on the cusp of confirming an early downturn in that all important cycle. Wall Street thinks that the market is in a bull market correction. Looking at the linear regression channel going back to the January 2001 high gives a different impression. By any standard of technical analysis, the broadest of the most widely followed market averages has never passed the test of being in a bull market. Do not be taken in by Wall Street's Big Lie, especially when it is a near unanimous consensus. When Wall Street is unanimous about something, it's at the end of the trend, not the beginning.
This is a critical juncture on the cycle chart. Intermediate cycle indicators have begun to turn down at relatively low levels. A downturn from these levels normally indicates severe weakness ahead. The 1 year cycle up phase has been under way since the September 2001 lows, and is now completing a second top. The top building process usually takes weeks. This one has been under way for 3 weeks. Time is now on the side of the bears, but based on the position of the short cycle oscillators, a short cycle up phase looks likely to intervene before the top is complete.
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 3/26/02
PTT - Periods Till Turn Nasgap Charts Short cycles are near a
low. The market will probably bounce or move sideways before the intermediate
top is complete and the 6 month cycle oscillator turns down. The
six month cycle oscillator remains weak in
negative territory, and precariously close to a sell signal. This indicates an extremely weak up phase,
and it will be a precursor to complete collapse if the indicator turns
down without further improvement from here. The decline has temporarily
stalled at the 50% retracement level of the February March rally. Nasdaq Cycle Conditions as of 3/26/02
PTT
- Periods Till Turn Sucktor Watch Looking at this chart is like watching a horror movie, and having to avert your eyes. This is the kind of thing that looks, at first blush, dare I say it, bullish. However, the oscillators tell a different story. Signs of distribution abound, and there are early sell signals. But there's one more short term up phase ahead that we'll need to grit our teeth through. As that unfolds bears will want to see it be weak, and the 5 month channel, in dark green, start to flatten out. Then we might see a return to sanity. Unfortunately, the short interest in this group is so high, that it's going to take something catastrophic to ultimately deflate this group. This is not about fundamentals. It is about a shortage of stock caused by sky high short interest.
Golden Stool The gold stocks pulled back today. Interesting that the intermediate up phase hasn't even gotten started yet. As long as the 10-13 week cycle momentum indicator stays above the zero line, consider the trend healthy. Short cycles need to consolidate however.
Yesterday, it began to look like bond yields were ready to consolidate. That process has begun, and it should last 3-4 weeks. So long as momentum oscillators stay in positive territory, the pullback will be shallow. However, keep an eye on the 55 day rate of change goes negative. If it goes negative, it would signal an intermediate term downtrend.
See you in Intraday Stool. Dr. Stepan N. Stool Let me know what you think on the Stool Pigeons Wire. |
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