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Steve Zito is a stock market technical analyst who also uses fundamental economic analysis to forecast the direction of the stock market. The views stated herein are his opinions only, and should not be relied upon as advice for investment decision-making. If you have a specific question use the feedback form.
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INDUSTRIALS INDICATORS
SUPPORT/RESISTANCE

Three of seven signals are negative
Fri. April 7, 2000

The Dow Jones Average
CHART INDICATORS

5-minute chart
Neutral trend
support at 11,106

15-minute chart
Negative trend
resistance 11,120

30-minute chart
Negative trend
resistance 11,120

60-minute chart
Negative trend
resistance 11,120

Daily chart
Neutral
major support 10,883

Weekly chart
Neutral
major support 10,814

Monthly chart
Positive
major support 10,195

Today's Update

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******************Commentary*******************
Dow charts have moved sideways since March 23 the date I mentioned Dow PUTS, but the Dow's short-term MACD, RSI, and stochastics have been declining. Since March 23, the short-term RSI has dropped to 50% from an overbought 80%. For all the media volatility hype, in eleven trading days the Dow is less than 50 points from its close on March 23. This is a sign of STOCK DISTRIBUTION. The public buys, while the NYSE specialists sell! Equity mutual fund cashflows turned negative last week, reported by analysts. The Dow daily chart support moved up again to 10,883. Day traders and momentum players use the Daily chart support level to get in and out. The Dow tried to break the Daily chart support level last Tuesday, when it dropped over 700 points at noon, but then the plunge stopped exactly at that day's Daily chart support of 10,720. Then momentum traders pushed the Dow up 500 points in 2 hours. Momentum trading causes this extreme volatility. My model correctly predicted on March 28 that the extreme volatility in the Dow was coming. In response to this volatility, mutual fund gurus are everywhere on TV and in print ads advising you to "stay the course" while their fund's big-time advisors are quietly getting their wealthiest clients out of the market. The Dow's MACD, RSI, and stochastics on the Daily and Monthly charts hit a 5-year peak at the start of this year, and have been negative since. The Dow has enjoyed 5 years of excess returns since the bubble began Jan. 1995 at Dow 3900. Studies show that the historical average annual reinvested return (AARR) in listed common stocks is 12%, thus the Dow's 5-year AARR of 24% has been excessive. The impending meltdown in the market will happen soon. The trick is to have PUTS when it does. April DJX put options were exited April 4 at a profit of 142% when the Dow hit support at 10,720. After a Dow rebound of 500 points the same day, May DJX puts were entered at Dow 11,225 for the Model Portfolio The Dow is set for a 1,000 point fall, when fund managers and specialists end their current spate of STOCK DISTRIBUTION. The Fed is raising interest rates, and this is not the kind of monetary policy that causes stocks to rise. There are still a few Stock Picks.