10 Minute Bar Charts 6/17/02

Dow Jokes Inflatables 

Portfolio Sphincters Index (SPX)

Nasgap

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6/01/02, 6/3/02, 6/4/02, 6/5/02, 6/6/02, 6/7/02, 6/10/02, 6/11/02, 6/12/02, 6/13/02, 6/14/02

The Anals of Stock Proctology

Published 5 times per week by the American Academy of Stock Proctology and 
the American Society of Shortsellers
Dr. Stepan N. Stool, A.S.S. Chair

Bulletin -1:05 PM - No sooner did I post the below but the market rolled over, triggering a sell signal on the 3 day ozzie. The 3 day cycle highs were probably hit on the AM run-up.

PM Update 6/18/02 1 PM   Terms and methodology

The market was slightly stronger than projections indicated in the AM. The 1 day cycle "should" be in a down phase. But cylicality is unclear as options market makers attempt to stabilize the market to allow an orderly unwinding. I'll assume this is a sideways down phase. But the 3 day cycle still has unmet upside cmaps, and the 1 day low is due before the end of the day,. I give the rally a better than even chance of resuming before the end of the day, but price changes should be suppressed, overall.

Doc does not make trading recommendations. This update reports intraday time cycle estimates and centered moving average projections based on the Hurst cycle analysis method. Doc assumes no responsibility for the accuracy or inaccuracy of these estimates and projections. The market may or may not meet these projections. New stoolies should thoroughly familiarize themselves with the methodology before trading based on this method. There is no free lunch. Those who do not have the time or inclination to develop a trading strategy based on testing and research should not trade. Trade at your own risk.

AM Update 6/18/02 9:15 AM   Terms and methodology

Housing starts jumped 11% and CPI was 0%. We have a super strong economy and zero inflation. We live in a perfect world. Sell the news? Fucutures yawned. Cycles look like they should try heading up for a couple hours, but there are signs of churn. Again, it's opex week, so the level of derivatives related manipulation makes cycle patterns go haywire. Still have higher projections on the 3 day cycle. Trade with care, if at all. 

The Crapvision Infomercial Script (6/17/02) Here comes the stealth bull market nonsense on Crapolavision again tonight. This is the old recurring lie about breadth. Yet another analcyst was on showing a chart of the weekly advance-decline line going through the roof since 2000. What a horsecrap indicator. Dead wrong all the time. It went down for the last two years of the bull market and up for the first two years of the bear market. But to the bulls, it was proof of the stealth bull market. 

In reality it's just a matter of the reallocation of funds from a few big stocks into many small stocks, thereby driving the small stocks to levels from which they too must eventually fall. It has done nothing to increase the size of the pie. It has done nothing to increase the value of the typical stock portfolio.

The NYSE Advance-Decline line is also heavily skewed because some humongous percentage of the issues are preferreds and REITs, i.e. interest sensitive stocks. That's fine if you're in stocks for income, but the vast majority of people aren't. The income sector of the market is tiny in terms of capitalization. 

The bottom line is that Wall Street will tell whatever lies it can think of to try and keep control of your money. The typical poodit thinks you are a moron, and that if they tell you these things, you won't notice that your 401K and your mutual funds have lost 40-60% of their value over the last two years. And therein lies the disconnect. People know now they are being lied to. And it has nothing to do with Wall Street's scandalous behavior finally coming out in the open. When you're down 50%, and they tell you how great things really are, you don't have to be Sherlock Holmes to figure out they're full of crap.

Another thing that you should take notice of, which I mentioned the other night, is how transparent the infomercial nature of Crapvision really is. It's just like the Vegomatic program or the Miracle Abdominizer. They actually flash across the TV screen what the shill is going to say before the shill even says it. Like this:

THINKS MARKET WILL RISE 15% THIS YEAR

Meanwhile, the straight man, whether it be Fartaroma, or Sue Herass, or Ron Insane, hasn't even asked the question yet! "So what is your outlook for the coming year?" 

They want you to think it's news. But it's not news. it's not even an editorial, or opinion, or even entertainment. It is pre-paid commercial programming specifically designed to brainwash and mislead. The whole damn show is scripted. This week's theme is the stealth bull market. 

The Feed added $7 billion in overnight repos, all of which was an addition, as there was nothing expiring. As Doc worried worried in the Weak End Anals, the total Feed (total Fed holdings of loans and securities) had dropped back to the bottom of the Fed's trend growth channel, giving Al  room to move, and he did. And if they want to, they can do it again tomorrow. 

The Fast Feedometer, which attempts to measure the amount of excess Feed available for jamming the stock market, is moving up again, and it's significantly higher than it was a month ago. The Fed is maneuvering to provide the capital necessary for the Gang of 22 to give additional support for stock prices. For a month, it didn't work, but it now appears to be. But Al does not want to start a stampede, because stampedes are destabilizing, and will suck money out of bonds, driving bond yields up. That's the last thing he wants. Perhaps he'll tip his hand Tuesday morning. We will be watching.

The Slow Feedometer continues to trend up, following the bulge of two weeks ago. The champagne music machine is doing it's best to keep blowing bubbles, and support stock prices. But this last wave of selling went a little further than the Fed would have liked. They can only influence the trend so much, but it always reasserts itself. The 
Of course, this week we are dealing with options expirations. The options market makers have had to cope with overwhelming public put buying the last couple of weeks. They were forced to hedge by shorting stocks and futures. When the Michigan sentiment numbers came out on Friday, no one was prepared and the market shot well below its short term targets. Extremely heavy put buying led to even more market maker hedge shorting. But the public selling was pretty much cleaned out in the panic. With lots of expiring in the money puts to contend with, the market makers began attempting to unwind their positions.  This is how derivatives melt-ups are generated. They have to sell their puts, and cover their short positions. That's what happened today. It's essentially unsustainable, and will be reversed after expiration, but what happens the rest of this week is going to be wild, a good time to be on the sidelines.

All of Doc's charts are powered by METASTOCK.  (Sorry about the bull.) You've seen the software advertised on TV.  Buy it now at Doc's bookstore! Best price anywhere!

Portfolio Sphincters Index (SPX) and Sentiment

The Sphincters Index had a huge 28 point gain, closing at the high. The 17 day rate of change, which represents the 6-7 week cycle, and the 6-7 week oscillator superimposed on the price chart, turned up, but not enough to flash a buy signal on the 17 day ROC. That indicator usually does not miss rallies this big, but this time it did. The 10-13 week cycle oscillator (navy) only turned flat. Another couple of up days would be needed to turn that indicator positive.

The 29 day rate of change upticked but is still in a flat pattern.. A flat pattern in negative territory indicates a stable downtrend. OK, not so stable in this case. If it breaks above the zero line, the rally could go a lot higher.

The VIX fell to 27.60. On the inverted scale chart, VIX has rebounded from the lower band. The band penetration appears to coincide with a 6-7 week cycle low, but it doesn't look like the extreme fear that tends to persist for several days at a 10-12 month cycle low. 

The blue channel lines are the extension of a linear regression channel from the February and May 2001 highs. 

The 6 month cycle oscillator remains flat. Flat in negative territory indicates trending. But is it ever close to a buy signal. If that does turn positive at this point I would not be inclined to ignore it. The trading stoolicator also flattened a bit. The short cycle oscillator exploded into positive territory.  The 10-13 week cycle oscillator upticked, but the trend is still down. The price action is still confined within the cycle channel projection, and it could overrun to 1050 without disturbing the trend. 

Fiber Nacho reflux will set in at 1045, and if it gets past that,  1056. 

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.

SPX Cycle Conditions as of 6/17/02

PTT - Periods Till Turn
L-Low, H-High
SWD= Sideways Down Phase- Trading Range
SWU=Sideways Up
p: preliminary
Too Early: Too soon to project

Nasgap Charts

The biggest melt-up was in the Nas, up nearly 49 points or 3.2%. The 6 month cycle time series spread flattened out. The 10-13 week cycle oscillator and the trading stoolicator did also, but remain in negative configurations. This is all about the overload of puts, which is driving the unwinding of market maker short put-short stock hedges. The rest of this week should see a little more upward pressure, but there are an awful lot of potential sellers who will see the 1575 level as a gift. It's going to be interesting. Initial upside cmaps are 1575-1625. My bet would be that the upper end of the range won't be hit, because of the selling that a move to 1600 would generate.

The short cycle oscillator exploded upward, and is in overbought land. The rally should max out Tuesday.  

The Nascrap 100 went on a rocket ride and is now centered in its downtrend channels. There should be a lot of resistance at this level. 

There are dual fiber nacho refluxes at  1564, and if it gets through there, another double line at 1600.

Nasdaq Cycle Conditions as of 6/17/02

PTT - Periods Till Turn
L-Low, H-High
*SWD= Sideways Down Phase- Trading Range
  SWU=Sideways Up
  p: preliminary
Too Early: Too soon to project

AM Edition Features (Previous)

Long Bong Hit

I'm gonna stick my neck out here and say that bond yields are making a bottom. There's a confluence of cycle trend support levels, the oscillators reached levels where the last lows formed, and they are beginning to turn. Stock prices and bond yields have moved in lockstep. Does this mean the stock market rally is for real? I plead the fifth. Better yet, I'll drink it. But no, I don't think so. Sooner or later the stock-bond price relationship will invert, and go back to the historical norm of moving in opposite directions. In other words. the price (inverse of yield) of both will go down together.

Suctor Watch

SOX- Was yesterday's rally the beginning of a sideways up phase or a one day wonder? Probably somewhere in between. Watch the 10-13 week cycle momentum. Unless it rises out of its recent range, this is just another flash in the pan rally.

While the rest of the market launched, the Dow transports weren't quite as exuberant. 

The all important banking index exploded upward after breaking key support a few days earlier. The oscillators haven't yet turned enough to indicate that anything important happened.

It  "looks" like the small craps came off a bottom. But unless the 29 day rate of change and the 10-13 week cycle oscillator turn up strongly this is going nowhere.

Stoolwethers

Mister Bill's chart is enough to start giving a bear pause. Is the stocks building a base for a 10-12 month cycle upturn? Nah. It could move a little higher, but this is a big cyclical sideways up phase (consolidation) in a secular downtrend.

A big cyclical sideways up phase is also under way at Wally World. The next downturn will break the primary uptrend.

Same thing in GE, only weaker.

Stock O'der Day

stoolie rog has been a MO bull for years, (something about a dividend, what's that?) but he's getting worried. He might have reason. It's not completely clear, but the downtrend in the oscillator highs over the last year suggests that top building is under way. Watch the next rally to see if it falls short  or double tops.

Henceforth and forevermore, if you would like to request a "stock o'der", please post your request in Dear Dr. Stool. If you have not already registered for the message board, please do so. The only required info is user name and password which you choose yourself, and your email address, which you can keep private by selecting the keep private option. Doc looks forward to featuring your ideas. We've had some good ones!

Uncle Buck's Illness

Yesterday's stock rally was not supported by foreign buying. The stock market rally was strictly a domestic affair, which is unsustainable. Uncle Buck remains in intensive care. 

Golden Stool

Gold stocks got dumped again yesterday. The 6-7 week cycle momentum is at the same level it reached at the last couple of short term lows. The down phase should come to an end over the next several days. Last week's lows will be tested, and perhaps nominally broken, before the turn, but when the oscillators begin to turn, the low will be in.

See you in Intraday Stool. 

Dr. Stepan N. Stool
Chairman of the Department of Stock Proctology
A.S.S. Endowed Chair
American Society of Shortsellers Endowment
American Academy of Stock Proctology

Let me know what you think on the Stool Pigeons Wire.

Previous complete issue with all features

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!

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Explanation of Intraday Commentary-Build charts at http://www.livecharts.com.  For custom time bars insert a comma after symbol and number of minutes, e.g. compx,90. This will give you a bar chart of the Nas with 90 minutes per bar. The one day cycle is usually most clear with 8 minute bars and 26/18 stochastics. It varies from day to day. Sometimes 6 minutes works best. Experiment to find the best fit for your trading style, and the market's dominant frequency at the time.

The goal here is primarily to monitor the condition of the 8 and 13 day cycles. I typically use 90 minute bars with 26/18 stochastics for the 13 day cycle proxy on the indices during regular trading hours. Other cycles use 26/18 stochastics with the following:

8 days- 60 minute bars
5 days- 40 minute bars
3 days- 24 minute bars
2 days- 16 minute bars
1 day- 6, 7, or 8 minute bars

On the 24 hour futures charts, use a time per bar approximately 3 to 4 times the above number of minutes, to represent the cycles listed above.

ABBREVIATIONS:

cma: centered moving average
cmap: centered moving average projection
os or ozzie: oscillator
sto: stochastic
swup: sideways up phase
swdp: sideways down phase