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.
Nasdaq April 4 -Trading Tips -Sitemap -Stock Picks -EMAIL ME

NASDAQ COMPOSITE
INDEX closed 1785.87

Nasdaq is headed down until April 15, 2002

******************Commentary*******************
April 9 Go To Page 2. Nasdaq Composite closed at 1785.87 +15.84 on Mon., April 8. Dow Jones closed 10,249.08 -22.56. The downtrend in the Dow reached 13 trading days. Early Monday, IBM preannounced revenue, earnings, and markets opened sharply lower, recovering in the afternoon. IBM did not rebound, losing 10 points (10%). Why did markets turn around? They became oversold on the opening smash, and bargain hunters rushed in. The afternoon rally has no life, and the normal downtrend which occurs pre-April 15 tax date every year will continue. Better stock prices will be available next Friday. The threat of higher oil prices from a Middle Eastern conflict is a factor only for those oil companies which gouge a driving U.S. public. Exxon-Mobil is the most profitable company in history. XOM stock price has done nothing for a year. Why hasn't XOM stock benefitted from increasing demand by the U.S. gas-guzzling public? Simply put, XOM already is seeing the best of times, and its future cannot get better. Since stock prices reflect expectations of future cash flows, if Exxon-Mobil cannot do better in the future, XOM stock price is fully valued. The Dow did not break last week's low on Monday's IBM news. But it will any day. Nasdaq had a very bad opening, still suffering from Rick Sherlund of Goldman Sachs making untimely downgrades last Tuesday. Nasdaq opened at 1735, so deeply oversold, it rocketed 50 points all day to close higher. Microsoft hit 54 at the low, Oracle broke 12, Worldcom dived to 6. The perception on the IBM earnings news is Investment Technology sales are not rebounding despite US economic statistics pointing to a mild US recovery. Why? Because tech growth markets are in Asia, and the US dollar is too strong from policies initiated by Robert Rubin in late 1990's. Over-valued dollars ruin competitiveness. The 90-day moving average for the Dow has fallen 13 days to 10,292. The moving average has declined from 10,560 at February's peak. The present rate of decline is equivalent to a 43.9% annual fall in the Dow. After April 15, expect a trend change. Short-term trend this week is down, despite all signs pointing to an improving economy. RSI is less negative, MACD is bearish. Dow's stochastics not oversold enough for a rally at 46%/45%. I wrote March 28 to expect weakness in the Dow from April 5 to 15th. I wrote mid-January Nasdaq would top out at 2100. I said that subscribers should 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. With IBM reporting future earnings disappointments, Nasdaq is now down 8.7% on year, semiconductors down 10%, and surprise, networking down 29%. The group to buy at Nasdaq 1620 would be networkers for a classic turnaround of all time.
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