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 on investment decisions.
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NASDAQ COMPOSITE
INDEX closed 1784.35

Nasdaq is headed down until April 15, 2002

******************Commentary*******************
April 4Go To Page 2. Nasdaq Composite closed at 1784.35 on April 3. Dow Jones closed 10,198.29. The Dow plunged to the low of the week on Wednesday's close, as sellers hammered stocks on news of impending war in the Middle East. Normally, stocks fall in the ten trading days before the April 15 income tax deadline, as discretionary funds are diverted to tax bills instead of new investments. This year, Middle East tensions started the annual April swoon 3 days early. It did not help that top analyst Rick Sherlund of Goldman Sachs downgraded Microsoft on Tuesday, (which Goldman clients most likely knew Monday) and then Microsoft President and COO Belluzzi announced he was leaving. Microsoft, the 2nd largest component of Nasdaq Composite is in the Dow. As Microsoft goes down, software and personal computer stocks will follow. My advice last week at Dow 10,426 was to go short- April Dow Jones puts. If you have them, hold them to April 15. If you don't, get them now, before the Dow breaks 10,000. Nasdaq has different problems. When Goldman's top tech analyst Sherlund downgraded Microsoft, he downgraded Siebel and top players in enterprise software space. Not on this year's earnings, but by lowering his estimates for mid-2003. If anyone could tell us what Microsoft is going to earn April-June 2003. Goldman's very wealthy clients lent an ear, and dumped tech early on Monday. Microsoft is 56.33. The 90-day moving average for the Dow is 10,325, and it is 1.2% below it. Short-term trend is down, despite all signs pointing to improving economy. The Dow held support level at 10,292 for Monday, Tuesday, but caved in. Next major support level comes in at 9858 and this week's rate of decline will place the Dow Jones Industrial Average there sometime on April 12. RSI is decidedly negative, trending down for ten days. MACD is bearish. Dow's stochastics have plummeted to 18%/28%, not oversold for a rally. I wrote last week to expect weakness in the Dow from April 5 to 15th. On 10-day chart, Nasdaq is 0.3% below moving average resistance 1789. RSI, MACD negative, both were higher Monday, turned down Tuesday. Stochastics are mostly neutral 55%/25% reflecting rebound from oversold. Nasdaq filled the short-term gap between 1858 and 1880 in Monday's gain, before plunging to a 1770 low late on Wednesday. Blame Goldman Sachs downgrades. I wrote mid-January Nasdaq would top out at 2100. That was the exact top. After that I wrote subscribers to add 10% to portfolios on dips under 1800. Since topping at 2100 exactly, Nasdaq has declined below 1800 three times. Those following my strategy should now be 30% invested in Nasdaq techs. The other 70% can go into Nasdaq on any near-term decline to 1620 level. On intermediate 90-day chart, Nasdaq 2.0% below 90-day moving average resistance 1820. Those expecting further gains in Nasdaq intermediate-term were heartened by a dramatic rise on Monday to 1866 despite Middle East. On the other hand, Goldman downgraded tech and Microsoft exec resigned. Nasdaq went into a freefall on those news events, and broke 1807 support. Intermediate RSI, MACD going negative at lowest levels in the past month. 90-day stochastics are falling and are now neutral to over-sold at 19%/52%. Long-term Nasdaq moving average resistance 1850. The Nasdaq exhibits an inclination to make a sudden sharp downward move to 1620 possibly to complete what technical analysts often call "reverse head and shoulders." The short and intermediate charts do not show this happening, but possible. RSI, MACD negative, oversold stochastics have fallen sharply 18%/48%. Long-term chart forecasts sideways action in range around 1700 to 2000. Technical Analysis- stocks. Intel closed at 29.87 below 90-day moving average resistance 30.40. RSI, MACD negative, stochastics neutral at 23%/33%. Support at 28.40. Technically, if Intel breaks the 28.40 level this week, it is headed to 25. Microsoft closed at 56.33 below 90-day moving average resistance 58.80. RSI, MACD negative, stochastics plunged to oversold level at 20%/30%. As mentioned previously, President and COO Beluzzi retires as of May 1. Bill Gates sold holdings at higher price levels from 70 to 72 the past year. Now Beluzzi becomes fall guy for the less than spectacular X-box game sales. Cisco closed at 16.60 below 90-day moving average resistance 16.80. RSI negative, MACD positive, neutral-bearish stochastics at 29%/48%. CEO John Chambers lacks credibility. Chambers cannot find new projects with investment returns higher than short-term money market yields on $16 billion in cash. How hard is it to find investment projects yielding higher than 4%?
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