PUBLISHED DAILY - STOCK MARKET DIRECTION January 2002 INTEL a Buy?
STOCK MARKET DIRECTION by Steve Zito Financial Newsletter Thu., Jan. 2, 2003
Technical Indicators Analysis of Nasdaq Composite Index technology stocks. BELOW
Redistribution or repost only with permission of the writer of this material, Steve Zito.
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Next section is the one-month market forecast from Friday, Jan. 3.
Jan. 2 close and day's net change for stock market averages
Dow Jones Industrial Average 8,607.52 +265.89 (+3.19%)
Standard and Poors 500 Index ..909.03 + 29.21 (+3.32%)
Nasdaq Composite Index .......1,384.85 + 49.34 (+3.69%)
NDX Nasdaq 100 Index ........1,027.86 + 43.50 (+4.42%)
Interest Rate 10-Yr Treasury Note yield 4.032% +0.214

Nasdaq 100 with 100 largest cap Nasdaq leaders closed 1,027.86 +43.50 (+4.42%) which
indicates mutual funds were buying big-cap stocks with year-end bonus money investors
sent to mutual funds. The substantially larger gain in the NDX compared to the broader
Nasdaq Composite is evidence. Without public participation which deserted the markets
in the last 3 years, stocks have limited upside. I expect Thursday's rally to end soon.

Comments Mr. Bush made to reporters from his vacation ranch in Crawford, Texas
showed the President as a callous millionaire, no different than his dad, who wrecked
the 1991 U.S. economy. Bush does not care about jobless, technology, or tech stocks.
Bush does care about oil, finding, securing, protecting it, and his 60% popularity polls.
After all, his constituents drive gas-guzzling Sport Utility Vehicles, want cheaper gas.

Dow Jones can be played with DJX options, and next week, I recommend put options
when the Dow Jones hits 8900. DJX closed at 86.08 +2.66 (+3.19%) and DJX options
are available for strike prices 80 to 100, with each point equivalent to 100 Dow points.
In mid 1980's, stocks staged a rally for first 6 days of January, then had a most severe
short term drop to March that year, until Dean Witter's John Mendelson called bottom.

We know war with Iraq is next month, stocks will suffer between now and the attack.
George W. wants to outdo dad, and Democrats offer no focus or strategy to stop that.
When I see millionaire ambulance chasers (Edwards, N. Carolina) claiming to represent
the average American, I know the Democrats will likely lose the 2004 Presidential race.
I recommend March DJX puts when available, and expect the Dow to test 7000 again.
Options reversal happens one week before options expiration, next expiration is Jan. 17.
This implies today's up trend will be reversed down by next Thursday, Jan. 9, at latest.
DJX is 2% over trend, breaking a 21-day down trend. Stochastics over bought 100%/50%.

Nasdaq Composite closed 1384.85 +49.34 (+3.69%). While looking impressive, the gain
occurred on a gap open, so those who could enjoy the move were only those who had
bought stocks on Dec. 31. Note, I wrote to buy stocks on Dec. 31 some 20 times back
in November and December, citing tax loss selling and investor belief in "January effect."
Nasdaq is 1.8% above trend support, but trend had been down for 21 trading days, and
the Nasdaq was overdue for a bounce. Stochastics soared to very over bought 90%/33%.
Rally does not have staying power, reminds me of a 93-year old man who is out of Viagra.

OSX oil service closed 89.61 +2.91 (+3.36%) at 1.3% over trend, stochastics 76%/45%.
Dec. 31 was good to buy OSX Jan. 80, 85, March 90 calls, RIGAD, RIGAE Jan calls.
Chance of oil going up 25% over 3 months exceeds possibility tech sales will grow 25%.
The only growth market in tech is developing the National I.D. card to track everyone.
National I.D. will be expanded to include alien entry into the U.S. SUNW could benefit.
But the diversion of resources to military, bomb detection, fingerprinting individuals
will leave personal computers, software, networking, Internet stocks far behind oil.
Iraq's oil fields have not been upgraded for 20 years, American firms will get orders.

The XOI oil stock index closed 455.48 +8.64 (+1.93%) and 1.4% above its rising trend,
with stochastics overbought at 100%/68%. XOI actually had a gain for the month of Dec.
Exxon-Mobil XOM 35.47 +0.53 (+1.52%). British Petroleum BP 41.30 +0.65 (+1.60%).
Tony Blair, (U.K.) has dibs on any oil scraps Bush leaves him, buy British Petroleum.
CNBC's Larry Kudlow on-air actually demanded for the CIA to overthrow Venezuela.
Then on CNN, latest reports are Nielsen said CNBC ratings were down 44% in 2002.

XAU closed at 77.82 +1.06 (+1.38%) at 0.9% over trend, stochastics neutral 50%/31%.
The TV media blamed today's stock rally in general markets on a better than expected
manufacturing orders report which showed new orders at 70%, indicating an inflationary,
expanding economy. If gold had been rising on inflation fears, today's rise would have
been stronger. If gold had been rising on a lower dollar, the dollar soared today, so
that theory has proved less useful. The remaining bullish factor for gold is war fear.
Rising political tension. Bush said to reporters that North Koreans "deserve to starve" so
gold did not do much. When Bush states North Korea deserves to be exterminated, then
gold will make another good move higher. Unless Mr. Bush gets advice to cool his jets.

When talking to reporters at his ranch today, Bush again could not pronounce nuclear,
and said "nuke-ee-lar" when discussing why he stopped heating oil shipments to Korea.
The TV media thinks this is funny, calling the mispronouncements "Bushisms" and never
reminding us this person has his finger on the button for 40,000 "nuke-ee-lar" warheads.

SOX closed at 308.56 +19.32 (+6.68%). Stochastics in 1 day from 12%/8% to 100%/30%.
Driving force behind December decline in semiconductors was a drop in over-valued Intel.
Intel and AMD led the sharp rise in the Semiconductor SOX Index today. It was oversold.

Intel Corporation. Microprocessors
INTC 16.69 +1.12 (+7.19%) is a short. Stochastics reversed from 9%/8% to 75%/22%.
I wrote for 2 months, short Intel at 18.30. If you did, stay short but have a Buy Stop
at 17, and if it goes to 19, short again. If today's rally continues for the next 3 weeks,
subscribers should still have 50% of the AMD Jan. 10 call positions left from earlier.
AMD is 7.01 +0.55 (+8.51%) at 5.2% over trend, stochastics overbought at 95%/50%.

Microsoft. Network Software
MSFT 53.72 +2.02 (+3.91%) and 1.1% above trend support. Stochastics to 75%/28%.
If this is a January rally, fund managers will buy large Nasdaq stocks like Microsoft.
IF...the rally lasts more than two days, fund managers fueling it will buy Microsoft.

Cisco Systems. Networking Hardware
CSCO 13.64 +0.54 (+4.12%) and 2.5% above trend. Stochastics overbought 99%/40%.
Cisco just did not sell down to where it became a value like IBM did at 54 in summer.
TV talk show hosts telling you to buy Cisco all the way down from 80, still not cheap.

Oracle Corporation. Database Software
ORCL 11.21 +0.41 (+3.80%) at 2.4% above trend. Stochastics overbought at 100%/53%.
Oracle is the only large Nasdaq leader to report good earnings, show any chart support.
Subscribers who went long at 10.50 (Nov. or Dec.) need to get a Jan. 10 put hedge soon.

Dell Computer. Personal Computers
DELL 27.71 +0.97 (+3.63%) and 1.7% above trend support. Stochastics up to 81%/40%.
Like the rest of Nasdaq 100, Dell will go up with Microsoft, Intel, Cisco, and when the
Nasdaq turns down late next week, Dell will head south just as fast. Can't stay at $30.

Sun Microsystems. Network Servers
SUNW 3.38 +0.27 (+8.68%) about 5.6% above trend. The only Naz leader with potential.
Stochastics soared to 100%/49%. Hit my buy target 2.98. Bidder on National ID contract.
For long-term investing, buy top quality tech and hold it for 10 years, you could make
ten times more money with $3 Sun Micro than $30 Dell Computer in same business.

Accenture Ltd (Bermuda based, operates out of United States).
Bearing Point, formerly was KPMG Consulting. IT Consulting
ACN 18.61 +0.62 (+3.45%) and is 3.3% above trend. BE closed at 7.11 +0.21 (+3.04%).
ACN stochastics extremely overbought at 99%/89%, and ACN puts should be bought.
Large gain on Dec. 31 in BE was likely short covering which wanted to get a tax offset.
Bearing Point did not follow through today, volume in both Accenture, BE was very light.
Many private lawsuits are pending against Andersen, naming Accenture as a co-defendant.
Similar lawsuits against KPMG likely for Xerox audits could name BE as a co-defendant.

International Business Machines. Information Technology Consulting
IBM closed at 80.57 +3.07 (+3.96%) at 3% above trend. Stochastics are very overbought
at 100%/44%. Trades like a semiconductor company, it is second to Intel. Trades like a
software company, since it is second to Microsoft. Trades as an information technology
consulting company, which it is, first before EDS and Accenture. Likely to lead rally.
Expect January rallies to be led by IBM, as only the large stocks are making nice gains,
the advance-decline Thursday, Jan. 2 was only a dull 3.5 to 1, on the morning gap open.
In the last few years, the first big up day those Januaries saw advance-declines of 5 to 1.

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