PUBLISHED DAILY - STOCK MARKET DIRECTION - © April 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.
SUBSCRIBE Updates published DAILY Worldwide Readership Index

STOCK MARKET DIRECTION by Steve Zito Email Newsletter for Sunday, April 6, 2003
To contact or ask me questions, please visit http://www.oocities.org/steve_zito
For proper alignment use font style, Courier New. Please set email width to 100.

Closing prices from Friday, April 4, 2003
Dow Jones Industrial Average
----------------------------------------- 8,277.15 +36.77 (+0.45%)
Nasdaq Composite Index
----------------------------------------- 1,383.51 -13.07 (-0.94%)
S&P 500 Index
------------------------------------------- 878.85 + 2.40 (+0.27%)
10-Year Note yield
-------------------------------------------- 3.944% +0.028

The U.S. unemployment rate was reported as unchanged at 5.8% for March but showed that
108,000 jobs were permanently lost, on top of over 350,000 jobs lost in February alone.
Even so, Labor Secretary Elaine Chao made the TV rounds smiling, praising the Bush plan
in her foreign accent trying to convince a wary public that cutting taxes on dividends
is good news for those waiting in line in the state employment offices. While millions
of Americans are losing jobs, Congress is making special provisions for expedited green
cards and permanent residency for servicemen in the U.S. military who are not citizens.
The Bush administration wants these soldiers to be officially on board before starting
the battle of Baghdad, the largest urban military operation the U.S. attempts since the
battle for Hue, Vietnam (Republic of) back in 1968, when jolly green and his war machine
inflicted 10,000 casualties on the enemy with 3 Marine battalions of only 2,500 soldiers.
see http://members.tripod.com/LANCREW/Battle.htm

While CNN is running non-stop glorification of the turkey shoot tank show around Baghdad,
the BBC is showing anguished faces of 22 million innocent Iraqis, whose 8-year old kids
will remember the U.S. caused their dysentery, diarrhea, and dehydration on top of hunger
and fear in history's greatest humanitarian crisis. While Rumsfeld eats "freedom fries"
in the Pentagon cafeteria surrounded by loyalists without a Christian belief exhibited.

Is this good or bad for the U.S. stock market? CNBC portrays destruction of Iraq as best
economic news since Reagan invented Star Wars. Non-stop right wingers mouth their phony
analysis 24/7 with a parade of retired Generals and Defense operatives for validation.
These commentators are the same ones who sucked a naive public into Nasdaq in 1999, with
stories and studies that U.S. stocks always rise over lifetimes, gaining in the long run.

Not one of the announcers on CNBC ever learned Finance at the Graduate level, or they
would know buying stocks entails greater risk than almost all other competing investment.
The simple truth is when companies liquidate, creditors and bondholders are paid first.
Stockholders receive what is left after fixed creditors are paid in full. Bankrupt firms
coming out of bankruptcy rarely pay anything to stock holders. The stocks which prosper
are those of companies demonstrating an ability to generate cash flows for long periods
of at least 5 to 10 years. Companies that pay dividends usually have excess cash flows.

Companies not paying dividends may not have excess cash. If they are not reinvesting in
projects with expected returns higher than long-term bond rates, those companies either
do not have excess cash, or if they have excess cash, do not have intelligent management
who knows what to do with cash. A great example is Cisco, which has $20 billion in cash.
Cisco should pay cash out to shareholders, or reinvest in projects, not just hoard cash.
Cisco management does not know what to do with $20 billion, making 2% in bank accounts.
Same for Microsoft with $40 billion in cash. Management at Microsoft has poor projects.
Of six major product lines, only the Windows monopoly has generated profits for MSFT.

On the other side, Intel reinvests most of its cash in research and continually has new
products, keeping its stock at a premium. Dell reinvests excess cash flow in marketing,
taking share away from its competitors. The largest of Nasdaq's tech companies all have
excess cash flows, which accounts for highly valued stock prices. Only one of them ever
went under, Worldcom, due to Citigroup promotion of its fraudulent business model, fraud
by Worldcom's auditors Arthur Andersen, who went along with the scheme. The 2002 Worldcom
bankruptcy wiped out WCOM shareholders, which at $50, CNBC called it "the stock to own."
The message is clear. Look for excess cash flows, and study what companies do with that.

The Dow Jones Industrials closed 8,277.15 +36.77 at 0.9% over its 14-day sideways trend.
The U.S. stock markets have been ignoring weak economic data since March 19, when the
Dow first rallied up to 8300, where it has gravitated to since. Why no upside progress?

TV media blames a war in Iraq. Why the limited selloffs on the downside? Iraq is blamed.
You cannot have it both ways. In fact, traders are most likely divided in equal camps of
bulls and bears, upcoming first quarter earnings are likely to herd some of these bulls
into the bear side. The likelihood of slow economic growth is higher than robust growth
which CNBC is predicting once the war ends. There is no "peace dividend" like end of the
Cold War when the Berlin Wall fell. Why? Iraq was at peace before the U.S. invaded them.

Now the U.S. and Great Britain have fostered hatred and contempt from France to Russia to
China, every Arab nation in between. That means lower world trade, less sales by the U.S.
to other nations, continued diversion of U.S. resources from productive activity into war
and homeland security. Lyndon Johnson tried to have "guns and butter" economy and failed.
Lyndon Johnson from Texas was a lot smarter and more politically adept than George Bush.
Dow Jones stochastics are overbought at 88%/86% implying some downside in the near term.
Keep holding DJX put options. Dow Jones options index, DJX closed at 82.77 +0.37 (+0.45%).

Nasdaq Composite closed 1,383.51 -13.07 at 0.3% over its sideways trend. Nasdaq has not
moved much in the last 14 trading days, Nasdaq stochastics fell to neutral at 65%/80%.
Nasdaq is led by tech stocks, and Dell has already preannounced earnings will meet their
guidance and analyst expectations. The other leaders have not affirmed, but none warned.
Analyst expectations will be met in the upcoming earnings, but most traders will focus
on guidance which is likely to be ambiguous, like forecasts Oracle had concerning sales.
Last month, Oracle said outlook was murky due to the war and a drop in Middle East sales.
Intel on the other hand, introduced its new Pentium M (Centrino) package and expects the
entire civilized world to upgrade to its wireless PC technology within a year. Good luck.

XOI closed 437.71 +4.78 (+1.10%) as the oil stock index has gained in the last 17 days,
since violating the 410 level March 12 which I had used as my "Stop Loss" out this year.
The oil index is still trading well below Jan. 2 level at 464, above low Mar. 12, 406.
Chevron was the first to speak last week, and say it might be interested in operating
Iraqi oil fields, but not right away. In other words, let the U.S. military fix them up
at U.S. taxpayer expense, and then Chevron might come in later and run them for profit.

Tony Blair will be meeting with George Bush in Belfast, Northern Ireland Monday for an
oil summit on how to divide the scraps when the dust settles in Iraq. Northern Ireland
is a wonderful example of how British troops are welcomed around the world to occupy
other cultures and religions and deny them decent jobs and freedom, and force Catholics
to live in poverty and barbwired neighborhoods. Northern Ireland and Great Britain show
former imperial power trying to relive the old days of glory using heavily armed troops.
In the case of Iraq, there is a rich oil prize which will be used to pay claims vs Iraq.
Oil stocks are rising because they pay dividends in excess of what investors can get in
ten-year U.S. Treasuries. British Pete BP pays about 4%, almost as much as 30-year bonds.
XOI stochastics are 77%/66% at slightly overbought. Still, the uptrend cannot be denied.
The largest oil companies, Exxon-Mobil, and British Petroleum, will have dibs on Iraq.

OSX closed 83.86 -0.25 (-0.30%) at 1.0% below a sideways trend. Oil service rallied from
index 81 to 88 in the first days of invasion on hopes that Halliburton and Schlumberger
would get into Iraq for contracts to repair Iraq's oil fields never upgraded in 20 years.
When the war was not over in two days, expectations fell slightly and then when Congress
began to call for sanctions against France, hopes for the French Schlumberger to have any
part in Iraqi salvage ops disappeared completely. France is owed $57 billion by Iraq for
construction and oil service business, and will never see a dime of their claim let alone
get new contracts. That goes for private French firms too. Expect Texas based HAL to get
the lion's share. The better option play would be calls on HAL instead of the OSX index.
Exploration and repair outside of Iraq may be slowing dramatically if the world is going
into recession, sending airlines into bankruptcy and SUV exports down. Less oil demand.
OSX stochastics are oversold at 8%/25%, and April has a seasonal upward tendency for OSX.

XAU closed 64.74 +0.56 (+0.87%) right on sideways trend trying to make a stable floor.
A false start last week when gold advanced from $328 to $336 to fall back to $325 on
all the weak economic reports at the end of the week, in the U.S. and also in Europe.
If gold is a reflection of war, it is doing a horrible job. Down from $392 at its peak,
gold bullion and gold stocks have fallen substantially since Jan. 24. That was the time
CNBC started running special programming, touting gold as a great investment. In fact,
before it, CNBC had been badmouthing gold for six years, until January when it hit $392.

Subscribers were recommended in January to buy the XAU March 70 and May 70 put options
and sell half (50%) to take profits when XAU declined to 64 at March expiration. Since
XAU 64, subscribers were recommended to close out remaining profitable XAU May 70 puts,
and go long on XAU May 75 calls in expectation of seasonal strength in gold through May.
Last week, the XAU bounced from 62 to 69 in two days only to fall back to the 64 level.
Gold was dampened by slowing growth around the world and the outbreak of SARS in Asia
which will further slow down world economies affecting tourism, shipments and politics.

Already a Finnish diplomat from the Beijing embassy has died from SARS over the weekend.
Gold can still sustain a seasonal advance in April and May when broad markets fall down,
as traders could buy gold stocks in times of extreme volatility to hedge portfolio risk.
Gold stocks have almost zero correlation to broad stock markets. They can go up or down
independent of the direction of overall stocks. This is not what the TV media tells you.

CNBC tries to make a simple case that when stocks go down, gold goes up and vice versa.
In fact, at the beginning of bull markets, gold stocks and overall stocks rise in tandem
on prospects of HIGHER ECONOMIC GROWTH and RESULTING INFLATION. Inflation hurts stocks.
Higher inflation reduces world value of U.S. dollars, gold moves inversely to the dollar.
I expect the dollar to fall up to 20% when the destruction in Iraq becomes clear despite
the lack of U.S. TV media coverage other than POW rescues and embedded troop maneuvers.
The dollar was up 2% last week and is rising in early Monday morning Asian spot trading.

Not one American TV network is showing scenes the BBC and German TV have been showing,
faces of innocent children without clean water, writhing in pain from diarrhea, hunger.
While Mr. Bush feeds his terrier dog more protein daily than half of the world's kids.
I would not be surprised if the White House dog, Barney, eats out of a silver bowl.

Bank stock index BKX closed 743.69 +9.23 (+1.26%) 1.5% over trend, stochastics 90%/80%.
Saudi Arab Prince Walil(?) largest single stockholder of Citigroup shares, said on TV
Saudis have no intention of pulling out of the U.S. stock market, his Citigroup is cheap
with a P/E of 10 and "rock solid $50 billion in worldwide business." He cares not about
SEC investigations of Citigroup's CEO Sandy Weill, who is a member of Augusta National
where they are holding the Masters Tournament despite no tournament sponsors, to protest
Augusta's refusal to admit women to the golf club. No wonder Tiger cannot get his putter
going these days. The National Organization Women (NOW) is blasting Wood's indifference.
Saudis practically own Citibank, and have $17 trillion invested in the U.S. to be strong
incentive for them to want strong U.S. dollars and support the U.S. military expansion.

Biotech stock index BTK closed 344.15 -14.53 (-4.05%) at 0.4% below a sideways trend.

Semiconductor stock index SOX closed 311.44 -7.82 (-2.45%) at 0.4% below lower trend.

INTC closed 17.05 -0.52 -2.96% sell short at 19.
AMD closed 7.10 -0.10 -1.39% and subscribers are holding April 7.50, July 10 calls.
MSFT closed 25.09 -0.64 -2.49% buy at 21.
CSCO closed 13.71 +0.07 +0.51% sell short at 15.
ORCL closed 11.37 -0.25 -2.15% buy at 10.50.
DELL closed 28.87 +0.20 +0.70% sell short at 29.
SUNW closed 3.34 -0.14 -4.02% buy at 2.79.
ACN closed 15.27 -0.33 -2.12% and subscribers are holding May 15 put options.
BE closed 6.29 +0.02 +0.32% and subscribers sold BE short a year ago at 16.
IBM closed 80.79 -1.12 -1.37% and subscribers are holding July 90 calls.
NT closed 2.24 +0.01 +0.45% and subscribers bought at 0.48.
LU closed 1.51 +0.02 +1.34% and subscribers bought at 0.75.
ELN closed 2.81 -0.06 -2.09% and subscribers bought at 2.85, Stop Loss at 2.20.

I wrote in the last newsletter on Thursday:
"There are millions of people in the U.S. who want to work, but cannot find a good job.
Either they are short, ugly, stutter, talk too much, smell bad, express unpopular views,
or just happen to repeatedly be interviewed by morons when they apply for employment."

Read this story on how those who stutter and have been abused are fighting the system:
http://story.news.yahoo.com/news?tmpl=story2&cid=519&ncid=519&e=9&u=/ap/20030404/ap_on_re_us/stutterer_s_lawsuit_2
headlined, Former Stuttering Test Subjects Sue University

Thanks for reading this edition of Stock Market Direction by Steve Zito.
Copyright Notice, all pages Copyright©2003 and are made available as my
service to the global Internet community. Pages may never be reproduced,
distributed, or sold in any medium without obtaining written permission
from Steve Zito. Additional information on website. This sample is free.

Special new subscriber rate US $59 for 6 months. Newsletters are emailed
normally Monday through Friday. Payment accepted by check or money order.
E-commerce payments from bank accounts are also accepted through PayPal.
For complete subscription information, click on the Subscription Page at
http://www.oocities.org/steve_zito/surveyform.html.
Credit cards are also accepted with Yahoo Pay Direct and now with PayPal.
Hire the Handicapped. We work just as hard as anyone, and enjoy life more.

Copyright Notice, all pages Copyright©2003 and are made available as a service to the global Internet community.
Pages may not be reproduced or sold in any medium without explicit, written permission from Steve Zito.

Mar. 12 Feb. 9 Contact Me QQQ Buy Airlines?