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10 Minute Bar Charts 4/12/02 Dow Jokes Inflatables
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The Anals of Stock ProctologyPublished 5 times
per week by the American Academy of Stock Proctology and Retail and Real Estate- Going Down? (4/13/02)
It seemed worse because of Turdsday, but the Dow continues to be Mr. Nowhere. In spite of all the carnage in two Big Dogs, the stage managers of the Dow Jokes show have done an admirable job of making things look a helluva lot better than they are. Big portfolios took a massive hit this week, and a lot of rich folks ain't quite as rich as they were two weeks ago. Just like the Nifty Fifty of the seventies did not break down badly until the final stages of the bear market in 1974, the Turdy Thirty of the zeros keeps getting pumped up while most investors are losing their asses. I mean, a 5 for 1 reverse split of Ma Bell? Who'd a thunk it? A preliminary projection of 9850 for the 10-13 week cycle is still out there, but it could take another month. As long as the cycles are conflicting, the Dow will just sort of slop its way lower, rather than break into a nosedive. Very tough on bears and swing trades of all types, but a lot worse for terminal bulls, who are beaten, worn down, ever so gradually. Retail Sales Equals Mortgage Activity The mortgage bubble is
subsiding, and not so gradually. The refi bulge was the engine that drove
everything else, including the stock market rally in the fourth quarter,
the economic non-recovery, and the so called resilience of consumer
spending. All of it was driven by the cash out equity bonanza from the
enormous but short lived mortgage refi boom. As reported Wednesday by the
Mortgage Bonkers Ass., mortgage activity was down again last week. Notice that activity was down in spite of the big drop in mortgage rates, which brings up the question of cause and effect, which I'll address below. Keeping in mind the typical
30-60 day lead time between application and funding, the refi bulge would
have been funded from December though mid February. Let's look at retail
chain store sales for the comparable period. Looking at the monthly data
from the Commerce Department, not seasonally adjusted, retail sales are
now growing at an annual rate of 2.5%. That's a real rate of almost ZE-RO,
and a lot of the increase in sales this month was the bulge in gas prices,
so overall, real growth was non-existent. Consumers are overstuffed and
tapped out.. So much for resilient consumer spending. It had nothing to do with economic recovery, just the refi bubble. Finally, let's have a look at
broad money supply again, as reported here Thursday night. Can mortgage rates get to those levels again? It's possible, but it would take some very bad economic data to get them there, and with so much of the refi demand having been met on the last pass at this level, rates would have to go even lower to trigger another bubble like the one we just saw. So dropping yields won't be as stimulative unless they drop a whole helluva lot.. Bond yields are on the cusp of either turning up or breaking down. They need to be watched closely for clues to overall demand, and indications for the health of the real estate bubble that has kept the economy levitated the past few months. As data from the ECRI shows, the non-recovery is out of gas.
Portfolio Sphincters Index (SPX) and Sentiment The VIX closed at 22.09, down from 22.33 Thursday. Low volatility complacency rules, and as long as it does, this down-up-down grind can continue indefinitely. On the inverted scale chart, VIX has finally dropped below the top band, signaling the beginning of a big decline in stock prices. The last short term rally came from the 27-28 area. At the rate we're going it will take weeks to get even there, and a good intermediate rally probably won't come until the index is well above 30. The 17 day rate of change, a proxy for the 6-7 week cycle, still hasn't turned up, but the 6-7 week cycle oscillator superimposed on the chart has. These signals can be a little early or a little late, but you can count on a bump up from somewhere around here in the next week. It's doubtful that Friday was the start since there's no confirmation from momentum. The 29 day rate of change, representing the 10-13 week cycle, is now definitely heading down, breaking out of the top pattern it's been in for weeks. This should limit any upturn in the 6-7 week cycle. 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 are still weakening from low starting levels. This normally suggests extended, severe weakness. So far the severe part hasn't materialized. The Chinese water torture decline is likely to continue.
After falling below the 61.8% retracement level of the February March rally, the SPX bounced right back to it. The next level up is at 1120, a 23.6% retracement of the recent decline.
There's nothing like the perspective of a weekly chart. The index remains
closer to the top of trend channels than the bottom, with intermediate
and long wave indicators still weakening. The secular downtrend slope may
be much steeper than drawn on the chart and could eventually align with
the slope of the 4 year cycle in green. 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 4/12/02
PTT - Periods Till Turn Nasgap Charts The 10-13 week cycle is early in a downturn, with the 5-6 month cycle in a weak up phase, the quintessential SWUP, or sideways up phase. The indicator keeps flirting with a breakdown, but positive cyclicality is still just strong enough to prevent it. The 6-7 week cycle looks like it wants to rally from here, but it won't get very far considering the weakness in longer cycles and the relative stinginess of the Feed.
Heading down, 1699 is a 100% retracement of the February-March rally. The first upside retracement level is 1777.
On the
weekly chart, the Nas still looks like it's in a major top as it skirts
along the upper channel projection. Nasdaq Cycle Conditions as of 4/12/02
PTT
- Periods Till Turn Sucktor Watch- Software The Goldman
Sucks Software Index looks like the rest of the market. It may or may not
bounce from here a bit, but unless a miracle is forthcoming, there's a lot
of downside in the coming months. Dirty Dirty SOX Is this the beginning of a very early downturn in the 6 month spin cycle for
the dirty dirty SOX? There are hopeful signs but the group remains
dangerous for shorts. Where's the darn SOX 4 and 6 week
cycle low? Perhaps right on the 6 month trendline. Too many shorts are fodder for the bulls and market
makers. If the group can get decisively below that trendline, we'll
know the tide has turned, but it should try to shinny up that line for
awhile first. Stool Request Line Stock O' The Day - UNH This one was sent in by stoolie Doug, whose characterization of United Health Group wasn't printable. I can understand why, if he's been short the stock. Round and round she goes. Where she stops, nobody knows. Short term could pull back to 75, but there's only a hint of weakening in the long term trend. Looks like nothing more than slow death for shortsellers. What is it with all these bullish charts sent in for Stock 'O?
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. Be clever! Anything longer than 25 words- automatic disqualification! And please, no penny stocks. Stoolwethers- Mafiasoft Time to
check in again with the world's largest criminal organization. Check out
that downtrend. Notice how the short cycle oscillator is moving up while
the stock meanders lower. Many technicians might call attention to the
positive divergences between momentum and price. At this stage of the
cycles that's normal. It would only be positive if the stock were to turn
higher from here. Golden Stool Over the next couple days, we may find out just how strong the uptrend in the gold stocks is. 6-7 week momentum is indicating a top. If the indicators remain at high levels, it's safe to conclude that these stocks are trending, and so long as the trend is intact, they can be held. The expectation here is still for a shallow correction like last month, but watch those 10-13 week cycle indicators. If they turn down, it might be best to step aside until the dust clears. It's also entirely possible that the group is getting ready to launch again. Doc continues to be a holder of precious metals funds until he sees clear and unmistakable signs of reversal.
The weekly chart of Gold shows price bumping into resistance, but the POG may be getting ready to break through that.
Long term
bond yields have been correcting for a couple of weeks. The moment of
truth has arrived, with yields back to the uptrend line. If short cycle
oscillators do not turn up with yields beginning to move up off the
trendline it could be a sign of severe economic weakness. It's going to be
real interesting next week to see what this market tells us as it trades
along this line. Bond yields have tended to cycle every 4 to 6 weeks.
They're due to turn up. Let's see if they do. While the long term indications point higher, yields could drop to 5% without disturbing the uptrend. If they turn up this week, the uptrend could strengthen, and we'd be unlikely to see 5% again.
Uncle Buck's Illness Every
time Uncle Buck looks like he'll finally keel over, he comes back from the
dead. Is it time for this up phase to kick into high gear for a couple of
weeks. Looking at recent cyclicality, it sure looks that way, but the 119
level may be impregnable. 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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