The Anals of Stock Proctology

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Update 9/30/02 12:30 PM Terms and methodology

If this is not a larger cycle reversal, and it doesn't look like one, at least yet, then the 1 day cycle is probably in the process of topping out as of 12-12:30. Lows would be due at 3 PM and tomorrow morning around 10 AM at the 5 day cmaps posted below.. If the lows are successfully tested this afternoon, the 5 day low is probably in, and we'd see a little pop or holding action for a day or two. Still would look for lower lows later in week.

Cycle	Phase	Target	Due
5 Hour- 1 Day
Nas	Up/Top	High 1179	Low 3 PM, 10 AM
SPX	Up/Top	High 815	Low 3 PM, 10 AM
NDX	Up/Top	High 844	Low 3 PM, 10 AM
5 Day, 8 Day
Nas	Down	1155	Today-Thursday
SPX	Down	785	Today-Thursday
NDX	Down	820	Today-Thursday

Update 9/30/02 9:45 AM Terms and methodology

Based on the opening action 1 day cycle cmaps are revised to Nasty 1155, SPX 790, and 100 Nads 815.

5 day cmaps adjusted to Nasty 1135-55, SPX 785, and 100 Nads - 800.

Update 9/30/02 9:00 AM Terms and methodology

Friday nite Doc said he would "look for the 1 day cycle low soon after the open on Monday. Until we see the fucutures action Monday morning, it's anyone's guess how weak the open might be. After a weak reaction attempt in mid morning, they should go into full meltdown mode in the PM." There are no surprises from the fucutures this morning, and despite the fact that they are down sharply at 9 AM, the indication is that the 1 day cycle just topped out at 6 AM.

Doc just isn't sure about the bounce early. A guess based on the action of the ozzies on Friday says look for lows at 10:30 and 12:30. The cmaps are probably a better guide. But if they open at the cmaps and drop from there, we'll need to adjust the targets lower. The 5 day cycle cmaps are minimums.

Cycle	Phase	Target	Due
5 Hour- 1 Day
Nas	Down	1180-85	10:30, 12:30
SPX	Down	813	10:30, 12:30
NDX	Down	849	10:30, 12:30
5 Day
Nas	Down	1175	Today-Thursday
SPX	Down	815	Today-Thursday
NDX	Down	835	Today-Thursday

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.

Doc's interview on Marketviews.TV will be available Saturday. Just look for the link. Many tanks to the show's host, Ike Iossif!

Weak End Anals (9/27/02)

The most important aspect of your Weak End Anals is the very long term view of the Suctor Charts. Looking at those it's clear that the secular bear market has barely begun. It's also clear that the technology industry is on it's way to being virtually wiped out. The technological infrastructure is in place. The equipment tends not to wear out, and the last generation of equipment and Soft Where doesn't obsolesce. Furthermore, when it comes to Soft Where, you can get just about anything you want on the web for free. It's every where and free is as soft as it gets.

OK, perhaps miracles do happen. Perhaps the market will hold together within striking distance of the recent and current lows. Fat chance, but Doc will have his antenna up, just in case. As a trader, you can never let your guard down. We must listen to what the market is telling us each and every day. If it begins to deviate from the course it appeared to be on, then we adjust. But until that deviation shows up, stay the course. As someone once said, "The trend is your friend."

The Feed did $6 billion in 5 day repos, effectively a net drain of $750 million as $6.75 billion in overnight repos expired. There are no expirations Monday.

Total Feed is hovering near the bottom of the 8% growth channel (blue), well below the 10% growth channel. (green line) Normally when they start pumping off the bottom of the channel, they continue for a couple of days. But they also have a habit of backing off if the market has a strong day. Which is exactly what they did after Thursday's up day. How much you wanna bet there's a massive Feed coming, in honor of Friday's wonderful market, and Sir Printsalot's triumphal return to his castle in DC.

Three trends are evident on the Feed Index. One is the 10% growth trend beginning in May of 2001. Feed growth has recently been at or below the lower boundary of that trend. The blue channel going back to last December suggests that Al may now be targeting an 8% growth rate. Then there's the golden box which says he's stopped growing Feed altogether over the last three months.

"No change in Fed policy" means the Greenspam put is still available in an emergency. Other than that, there's no sign of Feed jamming. That may change on Monday. If not, then it's safe to conclude the Greenspam put has expired. But don't be surprised to see them issue an SPX 700 put.

The Feedometer theoretically measures excess Feed available for bond or stock market jamming.

Financial

8 Minute Bar Charts 9/27/02
Dow Jokes Inflatables -295.67

The charts at left show the prior day's action in 8 minute bars with stochastics at %K 26, %D 18, a proxy for the 1 day cycle.

The market melted down after a weak rally attempt at mid morning. Intraday cycle patterns simply dissolved. By 2:30, when what should have been a 5 hour and 1 day cycle low failed to generate any buying, it became clear that a hard down phase in the 3 day cycle had taken over. The force of the down side of the 10-13 week cycle wave continues to rule. Doc will look for the 1 day cycle low soon after the open on Monday. Until we see the fucutures action Monday morning, it's anyone's guess how weak the open might be. After a weak reaction attempt in mid morning, they should go into full meltdown mode in the PM.

Dow Jokes Inflatables

The 10-13 week cycle cmap on the Dow moved down to 6950 from 7300 Thursday. That's probably a minimum. There's enough time for the Dow to drop below that. The low is during the first through third weeks of October. The power of this wave just kneecapped the up phase of the 6-7 week and 13 day cycles. The preliminary cmap for the 5 day cycle low due late Tuesday- early Wednesday, is 7400. The 4 week cycle cmap is 6900, due October 2 to October 9.

Given the benighting of Sir Printsalot of Greenspam, his immortal words spoken at Dow 6300 in 1996 are beginning to loom large.

Portfolio Sphincters Index-SPX
-27.59

Nasgap - 22.53

All of Doc's cycle 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

Long Term

The weekly chart shows two secular trend channel projections (dotted lines.) The upper path is in the process of being broken. The lower path should hold for awhile. The green channel is based on a 78 week moving average. Instead of cycling it trended on the way up, and has been trending on the way down, a function of the bubble and its unwinding. It is probably accelerating down. The 6 month cycle oscillator is topping out, and the recent rally failed to penetrate the center line. The devastating selloff of the last month is part of a top, and downward acceleration is like over the next 3 to 4 months.

Short Term Cycles

Looking at the charts below, you see that Friday afternoon's waterfall decline only brought the Sphincters Index back to the center of its regression channel. The channel's bottom line is just below 800 on Monday. The 8 and 13 day cycles topped out and have 3 to 8 days to go on the downside. The up phase of the 6-7 week cycle is a dead issue. It's been cut off by the undertow of bigger waves. The downside cmap on the 4 week cycle is 720, due in 3-8 days.

10-13 Week Cycle

The 10-13 week cycle is the big kahuna of trading cycles. We love this cycle here at Capitalstool.com. The cycle indicators continue lower. The low is still 3 to 18 days away, with a cmap of 700. That could change, of course, but that's where it's pointing now.

VIX

The VIX rose to 43.14. It's back in the upper band of the inverted scale 6 month cycle Stool Band. A move through the lower blue channel band followed by a reversal would confirm an important low.

The 17 day rate of change is a proxy for the 6-7 week cycle. the 29 day rate of change is a proxy for the 10-13 week cycle. The dark blue overlaid line is the 10-13 week cycle oscillator, while the red line is the 6-7 week cycle oscillator.

The red channel is the idealized 2 year cycle. Dark blue is the 01-12, or 6 month cycle. Teal is the 10-13 week cycle. Purple is the 4 or 6-7 week cycle.

Fiber Nacho Dump- Support levels and downside targets.

Fiber Nacho Reflux- Resistance levels and upside targets

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 9/27/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/4 Mos.	650p
10-13 Week	Down/3-18	700
6-7 Week	SWU/4-9	Kneecapped
20-25 Days	Top-Down/3-8	720
8,13 Day	Top-Down/5-10	??

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
No Factor: Low amplitude is dominated by larger cycles

Nasgap Charts

Long Term

The Nasty looks like it too is about to break the lower secular trend channel projection and begin to move into the alternate projection (pink dotted line). As the 6 month cycle tops out here, a breakdown should lead to a move into triple digits as soon as October. The cycle low is due in January-February 2003. The preliminary cmap is currently 925. It should be a four year cycle low as well. Whether that 4 year cycle low results in a cyclical bull market depends on conditions at that time. We'll cross that bridge when the time comes.

Short Term Cycles

The selloff brought the Nas back to the center of descending short term cycle channels, topping out the 8 and 13 day cycles with 5 to 8 days of downside ahead. The 4 week cycle down phase has 5 to 8 days remaining. The cmap is 1080. The 6-7 week cycle up phase has been decapitated by the 10-13 week cycle wave.

10-13 Week Cycle

One to four weeks remain in the down phase. The cycle indicators are headed down hard. The cmap is currently 1025.

The stoolicator is a proxy for the dominant trading cycle, either 6-7 or 10-13 weeks. The 17 day rate of change is a proxy for the 6-7 week cycle. The 29 day rate of change is a proxy for the 10-13 week cycle. The teal channel is the idealized 2 year cycle. The light green channel is the idealized 10-12 month cycle. The dark blue channel is the idealized 5-6 month cycle. The red channel is the 10-13 week cycle.

Fiber Nacho Dump- Support levels and downside targets.

Fiber Nacho Reflux- Resistance levels and upside targets

Nasdaq Cycle Conditions as of 9/27/02

Cycle	Phase/PTT	Target
6 Month	Top-Down/4 mos.	925
10-13 Week	Down/1-4 wks	1025
6-7 Week	SWU/4-9	Kneecapped
20-25 Days	Down-Bottom/3-8	1080
8,13 Day	Top-Down/5-8	1080-1100

PTT - Periods Till Turn
L-Low, H-High
*SWD= Sideways Down Phase- Trading Range
SWUP=Sideways Up
p: preliminary
Too Early: Too soon to project
No Factor: Low amplitude, dominated by larger cycles

AM Edition Features (Previous) These features are in morning edition, published around 9 AM ET US, or the Saturday Weak End Edition, published, uh, let's see, Saturday!

Long Bong Hit

The long term view shows clearly that the move has gone parabolic and is in its end stage. Overextensions tend to end about 50-60 bps beyond the channel boundary, which would put this one at 3.25-3.35. That could happen in a stock market meltdown, as some of that money would get parked in bonds. The long term cmaps indicate lows of 3.30 to 3.60.

Golden Stool

Here's where it gets dicey. The long term trend is solid, but the intermediate cycle oscillator is in a top zone. Even if the 18 month cycle is trending under the influence of a secular uptrend, price is still vulnerable to a pullback to 310. The 18 month cycle channel (brown), is stretched as a result of the underlying trend. It could go into a long sideways down phase until it contacts the lower band of the rising long term channel. The result would be a consolidation in the 300 to 325 range lasting into mid year 2003.

Gold stocks exhibit a big intermediate swing cycle of between 12 and 15 months. HUI is nearly 5 months into a down phase that could last into early 2003. Support appears to be in the 105-110 area. After a cycle low in the first quarter, gold stocks should move up and retest the recent highs.

In the short run, mixed cyclicality will keep HUI in a range. There's a 4 month cycle here which just topped out and could be heading down until the end of November. The 6-7 week cycle is in the process of trying to make a bottom now. Until these two cycles get in gear, HUI should trade in the 120-140 range, and is ultimately vulnerable to 105 later in this 4 month cycle down phase.

Uncle Buck's Illness

You can see Buck's 6 to 9 month cycle pattern clearly on the long term chart. He's in a classic sideways up phase, as he creeps along major support. If recent cycle patterns hold up, this can go on into December, before the final breakdown.

Suctor Watch

When you review the suctors, keep this in mind. While most of them are resting on long term support, the 6 month cycle oscillator is at a peak, not a low. That implies that the support will break, and that we will look back in retrospect and see that Jul-September was a top, not a bottom.

Aerospace- Back to Hangar 170.

Bonkers- It just doesn't get an uglier. The 18 month cycle is heading down for 6 more months, and the 6 month cycle is topping out. The Bonkers are going to break down from this massive top.

Con Sue Me- The Street's been recommending consumer staples as a safe haven. They just don't get it. Doc calls the chart pattern over the last four years, the End of the World Formation. It would be a miracle if this didn't take out the lows. The big consumer stocks will be a liquidity sink. (Doc doesn't know what that means but it sounds good.)

Retail- Same Picture.

Druggies- The Drug Stock bubble- 6 years, 600%. They've barely begun to correct. They're trying to make a 15-18 month cycle low. That could lead to a 250-325 trading range over the next 6-9 months, after the July low is retested.

Biodrech- Intermediate and long term cmaps are at 300 and 250. Longer term could be worse. 18 Month cycle indicator upturn means lots of chop, and short squeezes ahead after selloff to 250. Track the daily chart closely.

Housing Bubble- Whether it's a bubble or not is a matter of semantics. But it's certainly a cycle and it's beginning to top out. This drama is going to take a long time to play out.

Mid-Crap- This was where The Street told you the new bull market was....after it was over. What happens next is going to be downright chilling.

Small Crap- Just as stinky.

Energy- Mind-blowing as it is. Even this chart looks just like all the pother crap.

Dow Transvestites- The bear market here began when trannies went out of favor in 1999. The cmap is now 1600.

Tech- Also formerly known as "Growth." Remember the Neurmaket!

Dirty Sox- You don't want to know the long term cmap on this one. You do, you say? OK, how's "50" sound.

Soft Where?- The long term cmap on this is '0". That's right. Zero. Remember the Neuermarket! Nah, you don't have to worry about it going to zero. The intermediate cmap is 50.

Nutworkers- Yes Virginia. It can happen here. The cmap is -200. I better spell that. MINUS 200. At this rate, it will get there by Christmas. This index has gone from 1380 to 86 in just two years. And they say short selling is risky.

Telecommies- Another example of how a secular downtrend can accelerate into a collapse. This is an industry essential to the world economy. Kondratieff was right.

Stoolwethers - More to come Monday morning

Citicorpse- Long term cmap is 15, but should rally at 20.

Japalm (As in Napalm)- Lomg term cmap is -8. No, not 8, minus 8. Intermediate cmap is 14.

General Custer-Custers last stand will be at 10. Has defenses at 23.

Fat Ass- She finally broke wind. First sign of diarrhea. First rest area is at mile marker 50. Ewwwe.

General McClellan - One toe in the Potomac. Intermediate cmap is 32. The intermediate cycle ozzie is a head scratcher though.

BM- Hits the bowl at 55. Final flush to 28.

Market Maker Management- Marshalling forces at 100.

Mr. Bill- Time for the great LEAP forward. Ultimately heading for 15. First landing 25. Hey this is the intermediate up phase. Can't wait to see the down.

Tell- Intermediate target 10. Long term 5, if they're lucky. Zero, if not.

Crisco Skid- Intermediate cmap, 6. Long term, zip

Wally- The last man standing. 54-40 or fight!

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

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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