Steve Zito, MS Fin./BS Econ. Wharton School, HTML Writers Guild
uses economic and technical analysis to forecast the direction of the stock market. The views in this newsletter are opinions only, and should not be relied upon as advice for investment decisions.
Nasdaq Jan. 8 Nasdaq Jan. 2 INDEX **INTEL Review** EMAIL

NASDAQ COMPOSITE
INDEX closed 2626.50

Nasdaq oversold and ready to bounce
Mon., Jan. 15, 2001

******************Commentary*******************
Jan.15 Nasdaq recovered 230 points since Jan.8, 40% of my forecasted rally to resistance at 2950 (2-year moving average). This rally will not be a straight line advance. I expect buying pressure to push the Nasdaq higher this week due to stock options expiration arbitrage before January 20. Of note, several technical indicators are clearly predicting a sell-off at any time. MICROSOFT and DELL are big-cap leaders likely to continue recent advances. INTEL is neutral. Cisco, Oracle, and Worldcom are showing very negative technical data. Nasdaq 10-day chart stochastics were completely OVER-BOUGHT Thursday, and fell hard Friday to 33.45/64.16% (compared to 83.12/18.85% Jan. 8) due to profit taking and a Lehman warning on Intel. The short-term chart predicts a lower open on Tuesday, but not much lower. Stochastics on the 90-day chart confirm more upside. Stochastics for the 2-year chart confirm a "trading" bottom in Nasdaq has been made as predicted in December by Morgan Stanley's Barton Biggs. Nasdaq has made ten 250-500 point rebounds in past 3 months, none of which lasted more than 3 days. What killed last week's rally? On Friday, Dan Niles of Lehman forecasted FRESH NEW LOWS by summer for Nasdaq electronic stocks, calling for as much as a 50% decline in Intel (to $16). With this kind of negative sentiment, the springtime rally in semiconductor stocks should be terrific. Electronics analysts (notable exception Ashok Kumar) have been dead wrong on Intel for over a year. With record profits at their brokerages causing huge year-end bonuses for these analysts who recommended Intel when the Nasdaq was over 5000, 4000, and 3000, the public should stop listening to their money-losing ADVICE. Intel may not be going much higher than $35, but the risk of it going to $16 is very low. INTEL dropped 5.5% off Thursday high and stochastics plummeted Friday to an over-sold 13.16/35.27% on a negative NILES comment (vs a rising 75.00/29.28% Jan.8). MACD continued higher at 0.40 (from 0.31) as Intel has completed a perfect series of declining tops and rising bottoms from Dec. 19. With earnings due and heavy resistance at $32.56, a failure by Intel this week to break out to the upside with a decent Nasdaq rally will mean another 3 months of sideways consolidation before a move to $50. MICROSOFT stochastics fell to 35.56/50.01% (vs 71.43/43.19% Jan. 8) which is very similar to stochastics on Dec. 26. MSFT's moderate 30 P/E could improve if the next qtr. earnings reflect cost reductions at a time when Windows 2000 revenue is increasing. Cisco has extremely RISKY 93.8 P/E, stochastics are plunging again at 25.00/71.55% (vs 74.17/24.28% Jan. 8). Every growth fund holds Cisco because none of the managers have a clue as to what the word "RISK" means. Cisco will be at $35 soon. Oracle was frustrated again by hitting resistance at $32.75 for the 6th time in 5 weeks, failing to break through. Stochastics are like Dec. 26, a very negative 15.63/42.87% (vs 84.78/22.92% Jan.8). While over-sold conditions will support some "consolidation" around $30, inability of ORCL to break $33 is a FAILURE. The last quarterly earnings report could only support a $22 stock price (the recent low). Watch out for a LU-job if the next earnings come in below estimates. Worldcom stochastics are just as bad at 16.67/62.45% (vs 68.18/22.63% Jan. 8). WCOM stochastics look just like Dec. 28 when it traded to a new low. On Nov. 1, after patiently watching WCOM fall 71% from $66 to $19, Megan Kulick of Merrill Lynch downgraded WCOM at $19, still described it as a "PLAYER". How about a Player without a Prayer, Megan?? I would rather have my $22 in DELL, with only profit-taking dropping the stochastics to 26.98/44.53% (vs 79.31/32.44% Jan. 8). If Dell has not pre-announced earnings warnings, they won't. DELL benefits on rising Euro.
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