Stock Market Direction by Steve Zito Financial Newsletter February 2003 Page

PUBLISHED DAILY - STOCK MARKET DIRECTION - Š February 2003
STOCK MARKET DIRECTION by Steve Zito Financial Newsletter
Technical Indicator Analysis of the Nasdaq Composite Index
Individual analysis of the eight largest technology stocks.
Redistribution only with permission of the writer Steve Zito
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STOCK MARKET DIRECTION by Steve Zito Sample Newsletter Feb 9, 2003

Closing prices from Friday, Feb 7, 2003
Dow Jones Industrial Average
----------------------------------------- 7,864.23 -65.07 (-0.82%)
Nasdaq Composite Index
----------------------------------------- 1,282.47 -19.26 (-1.48%)
S&P 500 Index
------------------------------------------- 829.69 - 8.46 (-1.01%)
10-Year Note yield
------------------------------------------- 3.924% - 0.021

Intel Corp. INTC closed 15.05 -0.33 (-2.15%) and has fallen 16% since hitting its
yearly high on Jan. 14. Now at extreme 3.52% below its 17-trading day downtrend,
stochastics are very oversold at 10%/20%. Set to unveil a new power microprocessor
in March, but facing low cost competition from future rival China, Intel's greatest
days are behind it. By 2005, China will become the world's largest producer of new
semiconductors. Thanks to Bill Clinton, China was finally admitted to the World Trade
Organization which eliminated trade barriers to dumping below cost products in U.S.A.

Still, as a Dow Jones component and one of the 10 largest cap stocks on Nasdaq, Intel
will remain a market performer, and is likely to be higher one year from now. The last
great run for Intel was from 72 in November 1999 to 144 into April 2000, mostly from
unsupported hype by Lehman Brothers analyst Dan Niles in Wall Street Journal and CNBC.
Dan Niles had a ridiculous price target for Intel of 175 by year end 2000, but Intel
ended the year 2000 at 60 (based on pre-split prices, equivalent to 30 after a split).
Read more about this in my analysis on how to value Intel's stock price.

Microsoft Corp. MSFT closed 46.58 -0.84 (-1.77%) after peaking out Jan. 15 prior to
announcing a 2 for 1 stock split and initiation of payment of a dividend this year.
As largest holder of Microsoft stock, owner Bill Gates to save $100 million in taxes
on President Bush's tax cut plan. Gates has often been quoted as saying AIDS is the
world's greatest problem. Most likely Gates can solve any other problem in life with
money. Redmond-based Microsoft has $50 billion in cash sitting idle while Washington
state suffers through an economic depression. Democratic response to President Bush's
State of the Union address was given by the Chinese-American governor of Washington
who tried to address soaring unemployment and lack of opportunity in the U.S. but was
quickly dismissed by the Wall Street Journal and CNBC as "unknown" whom no one would
remember in three weeks. They were right. I don't remember his name. Still you have to
wonder why Bill Gates does not take his $50 billion Microsoft software cash balances
and hire everyone who is out of work in his home state of Washington.

Cisco Systems Inc. CSCO closed 12.85 -0.39 (-2.96%) at 3.52% below its 17-trading day
downtrend (same trend and distance from trend as Intel). Stochastics are oversold at
10%/22%, but Cisco is suffering from problems surfacing every day. Last week, Cisco
announced a piracy lawsuit against China for stealing patent secrets. My question is
how will they enforce any judgment against China? Think about it when you see Morgan
Stanley managing director Lucy Lin walking near the Forbidden City in her non-stop
TV ads on CNBC touting Morgan Stanley helped China create its first investment bank.

Lucy Lin never mentions bribery, corruption, or kickbacks while promoting how Morgan
Stanley helped their client, "the nation of China" while eliminating over 2,000 jobs
in downtown New York City last year (blaming 9/11). As long as brokerages and banks
funnel billions of funds to Communist China, the ruling elite in Beijing will believe
the U.S. wants them to have U.S. technology much the same way as the Japanese copied
television and consumer electronics designs from General Electric and RCA. Cisco CEO
John Chambers wants to branch out from network routers into "security and content"
which he remarked in a recent CNBC appearance. What he means by content is not clear.

Maybe Chambers wants to be "content" to collect billions on his 2 million Cisco stock
options. Personally, I sold my Cisco shares a long time ago when they traded above 20.

Oracle Corp. ORCL closed 11.34 -0.19 (-1.65%) at 2.4% below sideways trend, trend in
place for over 14 trading days, which have seen Oracle trade between 11.40 and 12.40,
until Friday. Stochastics are oversold at 8%/10%. Oracle broke above my buy target at
10.50 around November 20 and peaked at 12.80 on Dec. 2 before basing at 10.50 in the
month of December. Then Oracle surged again to 13.30 when I told subscribers to raise
their stop loss to 12.50, which was hit Jan. 15. Oracle has been leading the overall
Nasdaq in upside breakouts, first last August, then September, and will lead again if
Nasdaq stops falling by March. One reason is Oracle has a bid on a National I.D. card
contract, which will mandate that every person in the U.S. or trying to enter the U.S.
has a plastic I.D. card coded into a gigantic database (Oracle's specialty). The new
Homeland Security Dept. will especially want to know if anyone as a U.S. resident or
visitor has any Muslim blood at all in their ancestry, kind of like genetic branding
to keep track of potential threats. With 75,000 street gang members roaming the urban
streets at night in Chicago, Los Angeles, Detroit, and New York, you would think the
government would get its priorities in order. Why not try to catch criminals instead
of Muslims? In any case, Oracle or Sun Micro should get the National I.D. contract,
but Dell Computer has a legitimate chance since Dell's CEO is a buddy of George Bush.

Dell Computer Corp. DELL closed 23.34 -0.68 (-2.83%) at 2.83% below its downtrend
which began Jan. 8, the day after President Bush's dividend tax cut speech. That day
Dell was at top of its 2-year trading range, consistently trading between 22 and 29.
Why Dell should be capped at 29, and rally every time it trades to 22 is hard to say,
but it is quite observable in 3-year charts. Dell is not a growth company like Intel
which always comes up with new products. Dell is a marketing company, with characters
like "Steve from Dell" which appeal to juveniles, the largest source of new PC buyers.

When everyone has a PC on their desktop, who remains to buy PC's? Growing countries
like China, Indonesia, Malaysia, Taiwan. Chances for Dell to sell in those countries
have rapidly diminished in the past year as the U.S. has pursued military policies
which infuriate Muslims, over 90% of the 400 million population of Indonesia, and a
large portion of China's population. Dell has no way to match the cost structure of
China's largest PC maker, Legend Group based in Hong Kong. Realizing that Dell cannot
compete in China on price, Dell announced in December it would focus on distribution
partnerships to build market share. Hope Michael Dell speaks more Chinese than star
Yao Ming can speak English. In Yao's new TV ads, the 7 -1/2 foot Houston B-Ball star
cannot pronounce "Yo" correctly. Everyone who has seen a "Rocky" movie can say "Yo".

Speaking of TV ads, watch the Dell Computer boxes closely in their CNBC commercials.
Curiously, all the boxes have a very large tilted "E" on every side, top and bottom.
Nothing else. Isn't that tilted "E" the symbol of Texas-based Enron Corporation, the
greatest fraud of all time? You would think the college dropout CEO of Dell Computer
would change his product package to some other logo besides a copy of the Enron brand.
I have written there is no relationship between brains and wealth in the United States.

Sun Microsystems Inc. SUNW closed 3.07 -0.17 (-5.25%) at 3.46% below a 14-trading day
downtrend. Almost down to subscriber recommended buy target of 2.89, stochastics are
very oversold at 18%/28% and falling. Sun has held above 2.99 for the last 3 weeks,
moving sideways for 7 days. Bidder on the National I.D., Sun makes Sparc servers fast
enough for border checkers to quickly match plastic I.D. cards at airports and ports
so passenger lines can move faster than unemployment lines in the U.S. Ever see that
American Express commercial, "Don't leave home without it?" National I.D. is coming,
you better not leave your house without it. Especially if you have dark colored skin
and live in New York. Sun's stock traded as high as 64 in mid-2000 when Goldman Sachs
was recommending it as a "buy." They have kept a buy recommendation all the way down,
while their computer analyst Laura Conigliaro has badmouthed Sun's earnings and sales
for the past 2 years. If a bank gave you the wrong amount for your checking balances
every time you asked, you would change banks. When Goldman Sachs gives you bad advice
on which stocks to buy (like Sun), Abby Joseph Cohen gets on covers of every magazine
and financial TV show as "the guru to listen to." Like Abby, Laura Conigliaro has not
been right for five years, but still earns over a million. Go figure.

Accenture Ltd (Bermuda) ACN closed 15.11 -0.88 (-5.50%) at 5.56% below a weak trend
changing from sideways to down. Subscribers were recommended to buy ACNQC May 15 put
options when ACN was trading over 19 in early January. Then ACN's CFO Harry You said
business was not quite so good this year. ACN has been a poster child for tech stock
worries. Moving from Nasdaq last year to the NYSE has not helped create trust in the
firm run by former consulting division partners of Arthur Andersen. Stochastics are
oversold at 4%/20% but I expect ACN to break 15 and put the ACN May 15 puts into the
money. Bought them at 0.85, recommend to sell the ACN puts when ACN hits 11, and the
puts hit 4.50. On the CBOE, ACNQC last at 0.85 Bid 1.55 Ask 1.80 open interest 42 has
not traded since early January trades at 0.85. Shorting these over-valued consultants
has been easy money for a year. Accenture wants to grow in China. Let's see how they
can manage that and still abide by U.S. laws on Foreign Corrupt Business Practices.

They teach the laws against bribery for U.S. firms listed on the NYSE doing business
in developing countries, but in 2 U.S. MBA programs none of my classmates could tell
me what it meant because they were all foreign students who either did not understand
U.S. laws against bribery or just don't care. Many foreign students in my accounting
classes took jobs for Arthur Andersen in mid-1990's, which was criminally convicted
Arthur Andersen, and also Andersen Consulting, which changed its name to Accenture.

BearingPoint Inc. BE closed 7.25 -0.02 (-0.28%) at 1.76% below a renewed downtrend.
Like Accenture, BearingPoint will find it tough to compete against Asian consulting
firms on their turf in China. Stochastics are oversold at 18%/21%. Subscribers were
recommended to short BE when it was KCIN, KPMG Consulting traded on Nasdaq last year,
shorted at 16 in May. Since then, KCIN changed their name and moved on to the NYSE.
You can run, but you cannot hide. Stay short. IBM bought PwC Consulting last summer
to put BearingPoint and Accenture back into the stone ages. Bet on IBM long term.

International Business Machines IBM closed 77.10 -0.41 (-0.53%) at 1.15% below its
moderating downtrend. Clearly trying to fashion a bottom, stochastics are now rising
from oversold to 22%/23%. Had recommended to buy IBM July 90 call options when IBM
sold down below 79 (first forecasted when it was 89 in January), IBMGR at 2.80 -0.10
Bid 2.65 Ask 2.90 volume 162 open interest 6815 which are most heavily traded on CBOE,
but listed on all exchanges. I always go in at the Bid or place my limit orders below
Bid price. Never buy at market. You will get scalped for an extra 0.15 per contract.

Elan Pharmaceuticals ADR ELN closed 3.92 +0.21 (+5.66%) at 3.44% below new downtrend.
Stochastics are oversold but moving higher to 20%/14%. Subscribers were stopped out
at 3.65 back on Jan. 16 watched Elan go down to 3.30, then soar to 5.00 on surprise
sale of assets to King Pharmaceuticals. Since then, Elan has eased back to the level
where subscribers were stopped out. Recommend to buy again at 2.85. If Elan does not
trade low enough, so be it. The idea is buy low, sell high; not buy high, lose money.

Advanced Micro Devices AMD closed 5.04 -0.03 (-0.59%) at 2.70% below a moderating
downtrend. Stochastics are rising from oversold to neutral at 30%/28%. AMD like IBM
is trying to create a nice bottom. AMD is a lot cheaper than when Lehman Brothers
analyst Dan Niles upgraded Advanced Micro to a strong buy at 9.42 last December 2.
Hard to believe that Jim Cramer has Dan Niles on Kudlow and Cramer shows every week
taking credit for making people money in the stock market. I doubt if Dan Niles ever
studied business at Stanford when he completed his engineering degree. Stock prices
are not electrical circuits, and forecasting stock prices is an art, not a science.

Rambus Inc. RMBS closed 13.41 +0.06 (+0.45%) at 3.15% over its uptrend. At last a
stock with an uptrend. Rambus recently won a legal challenge on patent rights, and
could collect royalties from Hynix and others who use Rambus technology. Stochastics
are plunging to very oversold at 5%/20% but the stock price is not reflecting selling.
There is buying interest at 13.25 in Rambus. I will need some more research into the
current litigation which remains to be completed to see whether Rambus is a buy.

Thanks for reading this edition of Stock Market Direction by Steve Zito.
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