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10 Minute Bar Charts 4/8/02 Dow Jokes Inflatables
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The Anals of Stock ProctologyPublished 5 times
per week by the American Academy of Stock Proctology and Bears Bloodied Again (4/08/02) In a demoralizing day for bears, the big news reported on Proctovision wasn't the story behind the numbers, that being the profitless non-recovery epitomized by MyBM's profit warning. No, in the immortal words of Maria Fartaroma, it was, "The Dow is higher than 12 months ago." Do you realize how long they've been waiting to say that? To which Doc sputtered, "Oh yeah! Just wait a few days!" If you recall, last April, the Dow put on a ferocious rally. Are we in for a repeat that will allow the morons at Proctovision to repeat that statement? First of all, with the largest intraday recovery being in the Nasgap, it's safe to say that once again, it wasn't bulls doing the bulk of the buying. It was bears covering their shorts, helped along, no doubt, by those who take delight in seeing the screws put to shortsellers. Which is, of course, everybody but us. But this is a hollow victory for them, because in the end, it only serves to reduce future potential demand from this source. It's probably safe to say that not too many shorts who covered today reshorted before the close. This kind of action can go on for months on end, and at this rate, it probably will. The end result will not be panic, just a steady grind lower. But for the next week, perhaps two, conflicting cyclical trends will keep the market locked in the same uncertain trading range where it's been the past few weeks. In other words, not much up, and not much down.
The Dow bounced off the 6-7 week cycle projected low again, and it looks like that cycle is going to turn up following last week's buy signal. It also looks like the 8-13 day cycle wants to go up, but the 10-13 week cycle is down and should prevent a big move. So the odds favor a weak rally, or consolidation. Portfolio Sphincters Index (SPX) and Sentiment The VIX closed at 20.74, down from 21.11 Friday. It remains in a top zone, just above the 20 level (inverted on chart) which has been the precursor to big declines over the past four years. Complacency remains extremely high in spite of the SPX being down 45 points in a month. The 17 day rate of change, a proxy for the 6-7 week cycle, is trying to find a low, which now appears to be in process. A 6-7 week cycle oscillator is superimposed on the chart. It appears to have signaled an upturn. The bottoming and up phase is projected to last up to 3-4 weeks, but with longer cycles weak, the up phase should show up again as more of the same - a trading range. 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. First, the market needs to do some work in the 6-7 week cycle up phase. Things could get dramatically weaker later this month. But for now it's more stop and start water torture ahead. For those seeing this chart for the first time, the blue channel lines are the extension of a linear regression channel from the February and May 2001 highs.
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, in this case the 4 week cycle turned up in late March, and the 6-7 week cycle is turning up here. There's also trendline support here. These cyclical and technical forces have been working against a rout, and will continue to do so for another week or two.
The decline stopped dead at the 1111 fibo level, a 61.8% retracement of the March rally, and rallied to a 23.6% regurgitation of the drop since mid March. The next level up is 1135, and to the downside is a retest of the 1075 low.
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 4/8/02
PTT - Periods Till Turn Nasgap Charts The Nas was flirting with a trendline connecting the September and February lows, and broke it last week. The index appears to be coming off a 6-7 week cycle low, as well as the 8-13 day cycle low, and could shinny along the line or just below it, during the up phase which is projected to last about a week. The six month cycle oscillator remains weak in negative territory, and perilously close to a breakdown which, coming from these levels, would signal extreme weakness. So far it hasn't happened. The 10-13 week cycle is in a down phase which is projected to last 4 to 7 weeks. This should keep a lid on the upside, but likewise, the positive phases in the shortest cycles will be working against a sharp drop. Days like Monday may not be all that unusual in the weeks ahead.
Based on the 1735 low, the intraday recovery stopped at the first fib level. The next going higher is at 1815. Heading down, 1699 is a 100% retracement of the February March rally.
Nasdaq Cycle Conditions as of 4/8/02
PTT
- Periods Till Turn Sucktor Watch- Retail The Retail
Sector has been an institutional favorite, and was strong again on Monday.
But this rally looks like it may be among the last. This appears to be
distribution, based on the steady decline in the the tops of the momentum
and cycle indicators, but it doesn't rule out yet another new high in this
short cycle upturn. Looks still too early to short. But the time is
coming. Stool Request Line Stock O' The Day - NVR Today's winner is NVR, sent in by stoolie Doug, who had this to say, "NVR, A home builder. Geez enough said. A chart glance. Holy frijoles, looks like some internet stock circa February, 2000." OK Doug, not
real original there, but the chart speaks for itself. Small cap Amex
stocks with a $2.5 billion market cap normally don't make the grade, but
this is a joke. Split already! 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! Mission Accomplished But more to
come after the dip buyers first do their thing. Golden Stool The short cycle down phase in the gold stocks continued. Keep an eye on the 10-13 week cycle oscillator. A rollover from these levels would be bearish. For now still betting on a shallow correction. But it's likely to last at least a month.
The short cycle on the 10 Year Treasury Yield is coming into a low, and the intermediate wave is up. 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, but it looks like the short term down phase is bottoming with the intermediate uptrend intact. Yields may be getting ready to launch again. The next few days should tell.
Uncle Buck's Illness Uncle
Buck (the dollar) started to get his color back on Monday. Looks like the
rigor mortis rally is underway, to at least retest 119, and maybe more. 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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The
Dow Jokes Inflatable Average wasn't able to overcome the carnage in IBM.
Recall that the Dow is a price waited average, with the highest priced
stocks having the biggest moves carrying the most weight. So IBM's 10
pointer was the tail that wagged the dog today, and there wasn't much the
stage managers could do about it. In fact, Goldman Sachs, the specialist
in IBM, was probably damn happy, since from their call on the stock last
week, it was clear they were short a boatload. As Doc said last week, we
wanted to be on the side of the research call for a change. Got
that! 
Chart Powered by METASTOCK (Sorry about the bull.)
Chart Powered by METASTOCK
