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10 Minute Bar Charts 4/4/02 Dow Jokes Inflatables
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The Anals of Stock ProctologyPublished 5 times
per week by the American Academy of Stock Proctology and Late Wednesday, the Dow and the Nasgap fell to the trend line connecting last September and February's low. Thursday the market played jump rope around that line. It was frustrating for traders, but when the market falls to important trend lines like this, it often spends a few days shinnying up the line. It's what comes after, that we need to worry about. While intermediate cycles are definitely weakening, there are signs that the 6-7 week cycle is at or within 3 days of a low. That's when things really get tricky, because I know of no way to predict whether it will be a saucer bottom at current levels, or one of those death defying 3 day bungee jumps. My guess is that the current lows will not be broken by much over the next couple of days, before a weak rally ensues. So no excitement for awhile. (Famous last words.) Today's news theme was fear of weaker than expected recovery, that based on the weaker than expected employment numbers. So they bought bonds, sold the crap out of the oil and gold stocks they had been buying hand over fist, and for today at least, it was an excuse to take that money and rotate it into other stuff. The thinking is that now the Fed will stay on hold. All nonsense, but that's what they did. The Fed was a little aggressive in adding reserves today, but that only brought the week as a whole to neutral. Figures from the Fed show total banking system reserves up slightly on the week ended April 3 but still down from 1 and 3 months ago. Last week the Fed added 6.6 billion mostly through repo agreements. They slipped something under the radar here, because watching the daily changes, it looked like they were neutral. This is a 1% increase. M1 rose by 6.5 billion in the week ended March 25 but M3 fell by nearly $10 billion as mortgage refis fell under the weight of rising rates. The Mortgage Bonkers said that applications fell 1.9% in the week ended March 29, with refi applications dropping about 9%. Total apps were down 23.5% from the same period in 2001.The implications of the slowdown in mortgage growth are enormous. I'll have a more in depth look at the monetary data with charts, in the weekend edition.
The Dow Inflatables rallied off that long term trend line from the September disaster low. The 8 day cycle appears to be bottoming, but the 13 day cycle is still down for 4-5 more days, so those two are canceling each other out. The 4 week cycle is in a very weak up phase which has been absorbed by the late stages of the 6-7 week cycle down phase. That cycle is trying to bottom and turn up from the trend line, usually a pretty good bet, but the 10-13 week cycle is accelerating down. There's a lot of juxtaposition here, and eventually Officer Gravity always gets his man., but in the short run, things are likely to remain dull. Portfolio Sphincters Index (SPX) and Sentiment The VIX closed at 21.77, up from 21.65 Monday. It has started to move away from the 20 level that has delineated major turning points over the last four years. The SPX dropped 15% in the 6 weeks following the last such occurrence, in the August of 2000. For now, it remains in a topping zone. The 17 day rate of change, a proxy for the 6-7 week cycle, is still headed down, with a low due within 1-6 days. It is now below the zero line. When that happens trends often accelerate. I've superimposed a 6-7 week cycle oscillator on the chart. It is approaching a low. It gets trickier as the low gets closer. Prices could spike down for a few days before they reverse, or they could form a saucer bottom. Probably not a good time to put shorts on, but worth holding a bit to see if they spike, if you are already short. The 29 day rate of change, representing the 10-13 week cycle, looks like a sell signal, but as long as it continues to creep along its smoother, the assumption is that the top of that cycle is not yet complete. Down 40 points, and the down phase hasn't even started! That should give us some idea of what may lie ahead. First the market needs to do some work in the 6-7 week cycle up phase that's coming over the next week or two.
The 5-6 month and 10-13 week cycle indicators have turned down from low levels, and in the case of the 5-6 month indicator, very early. This normally suggests extended, severe weakness. If the short cycle oscillator is also turning down at low levels, that also often means a severe short term down, but Thursday it backed off from that signal. There's some trend support here.
1123 is a 50 % retracement of the prior rally from 1080. The next level to the downside is 1111, then 1095 (not shown). Upside levels are at 1133 and 1137.
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 4/4/02
PTT - Periods Till Turn Nasgap Charts The Nas is flirting with a trendline connecting the September and February lows. (The Dow is also.) The short cycle oscillator has been rising while the Nas actually drifted lower. That's a SWUP or sideways up phase. The market range rattles while the cycle oscillator moves up. This generally indicates deteriorating psychology and demand, and is normally followed by a sharp move down. That looked to be under way Wednesday, but the trend line support intervened. Off the coming 6-7 week cycle low, the index may shinny along the line for a few days, or it could break and then rebound. The six month cycle oscillator remains weak in negative territory, but what looked like a sell signal on Wednesday whipsawed on Thursday. The 6 month cycle remains in a weak up phase.
If the Nas breaks 1772, the next fib level going down is 1715. Going up, resistance is at 1812 and 1840.
Nasdaq Cycle Conditions as of 4/4/02
PTT
- Periods Till Turn Sucktor Watch- Retail This sure
looks like long term distribution, but short cycles are getting ready to
turn up in the next couple of days. One more weak rally to go. Then we'll
see. Dirty Dirty SOX They know how to test our patience don't they? Nothing new..
Stool Request Line Stock O' The Day AIG Tonight's Stock' O was requested by our friend Forus from down in the Nether World. Or maybe that's Netherlands? Anyway, Forus is famous for his ability to predict how much time is left until the market closes each day. Absolutely uncanny! Forus picked Best Buy because "I like the downside possibilities." Not very original, but given Forus's help with forecasting the time on the Intraday Stool message board, he deserves this. So Forus, this one's for you. The stock
has been in quite an uptrend, but it's running out of fuel and is
beginning to fall away from the central regression projection. Definitely
looks like distribution. Is it too early to short? Perhaps. The short
cycle oscillator looks bottomy. I'd want to see how the next short up
phase plays. But longer term, Forus, you may have something. I still have a few Stock'O's in the queue, but if you have an idea for one, send it to [email protected]. Include some original reason for why you think the stock is deserving. Anything longer than 25 words- automatic disqualification! Golden Stool The gold stocks have started the short cycle down phase we've been expecting. This still looks like a very powerful intermediate up phase in the early stages of a long term secular bull market in gold. I'm inclined to hold and see how this acts through the pullback, since the bigger uptrend appears intact. .
The short cycle on the 10 Year Treasury Yield is coming into a low over the next few days, and the intermediate wave is up. The next day or two will be crucial in determining the slope of the intermediate uptrend. The negative divergences need to be watched. If the intermediate momentum indicators turn down from these levels, yields could head down back to the 5% area. It looks like a short term low should form in a day or two. Once we see the following move up, we'll have a better idea about the intermediate trend.
Uncle Buck's Illness Uncle Buck (the dollar) almost died today, but he sat up in bed from the 117 level, and it looks like he'll hold on around these levels for a few weeks yet. Tell the family to go home for awhile. There are signs of an intermediate up phase taking hold. The nurse will call if things take a turn for the worse.
See you in Intraday Stool. Dr. Stepan N. Stool Let me know what you think on the Stool Pigeons Wire. Welcome To New Subscribers Welcome, and thank you for subscribing to the Anals of Stock Proctology. You may note some subtle differences in style now that this is no longer a free service. The perspective is still bearish, but it will have a more balanced approach than my message board ravings. You' won't see me screaming "BUY" about anything except perhaps gold, but you will see stronger indications of areas and times when I think it might be a good idea to avoid being short. And I promise that I will lose my temper from time to time to keep you entertained! I'll also be adding a new feature, Doc's By Request Stock O' The Day. If you have a stock you're interested in, send an email to [email protected], naming the stock, and why you think I should look at it, in 25 words or less. 26 words, and you're disqualified! Those that look interesting, I'll try to feature here within the next day or two. If you have suggestions about other features you'd like to see, send them along to [email protected]. Again, thanks for subscribing. Now, let me get to work!
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