Stock Market Direction by Steve Zito Financial Newsletter May 8, 2003 Page

PUBLISHED DAILY - STOCK MARKET DIRECTION - Š May 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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The Cable World Broadcaster Channel (CWBC) called analysts and found
Jersey Grabman at Worldgroup Financial for his opinion on McDonalds.
The Albertan Canadian Beef Scare sent McDonalds down 2.00 yesterday.
Here is what the Street's most widely followed beef analyst thinks,

CWBC: Jersey, welcome back. Good to see you. How are you?
Jersey: Bit stressed out with the Mad Cow news.
CWBC: So what about Mad Cow, how will it affect McDonalds?
Jersey: We think it is a buying opportunity, McDonalds Canada
......only buys inspected beef, inspected by the government.
CWBC: So why did everyone sell MCD yesterday?
Jersey: This always happens when news breaks, until you think.
CWBC: So you are a buyer here?
Jersey: We told our clients to buy MCD this morning.
CWBC: And the Mad Cow in the food chain won't hurt them?
Jersey: As far as we know, McDonalds USA does not import Canadian beef.
......McDonalds Canada uses inspected beef. People may stay away from
......McDonalds and other food stores but one cow in a million is not
......relevant. One Mad Cow is about as relevant as 3 chicks in Dixie.
CWBC: So you would eat at McDonalds today?
Jersey: Uh, urh, actually I don't own any McDonalds, my family does not
......own McDonalds stock, and my firm does not do investment banking...
CWBC: Okay, you disclosed your holdings. But would you eat at McDonalds?
Jersey: Actually I am a vegetarian.
CWBC: Great to see you again. Come back soon.
CWBC: Stay right here, we will be right back after a commercial break.

The preceding humor was brought to you by Stock Market Direction.
The names and descriptions are fictitious and any similarity to
real analysts and real TV financial news is purely coincidental.

STOCK MARKET DIRECTION by Steve Zito Newsletter for Thursday, May 8, 2003
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The newsletter below is based on closing prices from Thursday, May 8, 2003
Dow Jones Industrial Average
----------------------------------------- 8,491.22 -69.41 (-0.81%)
Nasdaq Composite Index
----------------------------------------- 1,489.69 -17.07 (-1.13%)
Standard and Poors 500 Index
------------------------------------------- 920.27 - 9.35 (-1.01%)
10-Year Note yield
-------------------------------------------- 3.671% -0.022

Dow Jones Industrials closed 8,491.22 -69.41 at 0.3% below Dow's 7-day moving average.
What is next for the Dow? Stochastics are falling at 30%/62%. The selling is not done.

While CNBC's Cramer is appearing non-stop to tout his "bull market to Dow 9500" based
on heavy store traffic at Home Depot (HD) and Walmart (WMT) which have been leading the
Dow Jones and the surging Retail stock Index RLX, retail sales were reported on Thursday
to be very sluggish at everyone else from Sears to Target. MSNBC touted President Bush's
bowlegged strut on the deck of an aircraft carrier Abe Lincoln as an image to win every
American woman's vote. MSNBC Chris Matthews described George Bush as the most macho man
in America and said, "What a stud every woman would want to have" as twenty-five airmen
swirled around Bush in last week's air carrier deck delivery. The logic Matthews used on
Bush is fuzzy. Why would a President in his flight jumpsuit carrying a helmet surrounded
by 25 men who have been at sea without women for 11 months be attractive to any females?

I have to believe female voters would rather vote for Hillary Clinton than George Bush.
In any case, American women were not shopping last week, according to retail sales at
major chains, contradicting the garbage given by Jim Cramer to 5 million CNBC viewers.
Remember how CNBC's Bob Pisani said the Dow had to close above 8520 on heavy volume to
confirm a bull market? Well, hedge funds and billionaire arbitrageurs have other ideas.
They are short selling Dow stocks, converting to Euros, and buying Germany and France.

Nasdaq Composite Index closed 1,489.69 -17.07 at 0.1% below trend. Stochastics 24%/60%.
I wrote for the last 2 weeks that Nasdaq would find some resistance at the 1525 level.
That was exactly the level at which upside momentum disappeared, and now closing below
the short term moving average (1495 Wednesday) is negative. Expect more selling soon.
Intel and Nvidia talking up the chip sector may provide some support to temper selling.

When Nasdaq futures were sharply lower at 5 AM Thursday before the weekly retail sales,
and before dismal Treasury auctions of 10-year Treasury Notes failed to attract buyers,
I searched for the cause and found a press release Thursday 4 AM that the World Health
Organization in Switzerland had banned travel to Taiwan due to the SARS epidemic there.

Readers know what happened to Toronto when CDC and WHO pulled the same routine on them.
Business in Toronto (1/5 of Canada's total) plummeted. Taiwan's economy is based solely
on semiconductor wafer, semiconductor chip, and Personal Computer notebook production.
If head executives of U.S. chip firms cannot travel to Taiwan, they will go elsewhere
to make deals, like Italy, Germany, Ireland, and Baghdad. Airfares to South Asia have
plummeted as low as $398 from U.S., but Northwest is beginning Detroit-Baghdad flights.

The stocks likely affected by options reversal are 2 large-cap favorites, Intel, Cisco,
which I had recommended to sell short during March and April - INTC at 19, CSCO at 15.
Recently I pulled recommendation to sell short Cisco at 15 when CNBC Cramer touted it.
That pathetic nauseating TV celeb has a million viewers, and pushed Cisco up 2 points.
Due to CNBC resuming such unethical touting of stocks held by the announcers or guests
which are not disclaimed (Cramer with Cisco), my shorts have been limited to Intel, BE.
While Cramer on CNBC has everyone chasing Cisco, Intel is not worth 19 no matter what.

XAU closed 70.48 +1.92 (+2.80%) at 2.7% above an uptrend. Stochastics rose to 96%/82%.
Subscribers are holding May 75 calls on the XAU index bought long ago when XAU was 64.
XAUEO closed at 0.20 with the Bid 0.10 Ask 0.25. Traded 244 Thursday. Five days left.
Check with online brokers on processing XAU as cash settlement on next Friday's open.
Buy June 30 calls Newmont Mining (NEM). NEM closed at 28.74 +0.55 (+1.95%) and is the
largest gold mining stock in the XAU index, ahead of Barrick Resources and Placer Dome.
Newmont has gained 18.7% since Iraq invasion began, up from 24.20. Stochastics 90%/80%.
Buy Newmont June 30 calls (Chicago) NEMFF last 0.80 +0.20 Bid 0.70 Ask 0.85 volume 795.

The U.S. dollar plunged to a new 4-year low versus the Euro at 115, rallied on the Yen
as Bank of Japan intervened $20 billion to support dollars to help Japan's exporters.
The Tokyo market rallied to 1-month high on the BOJ currency moves, but the German DAX
fell below 3000 to 2885 when European Central Bank decided not to lower interest rates.
Alan Greenspan commented he was worried about the $142 trillion in derivatives held by
a handful of investment banks, which could cause a collapse similar to Oct. 19, 1987.

The XAU Index is in a terrific upward trend, and on Monday, if Dow remains weak, gold
could continue to spike from June Gold Futures close at $349 today. Was $322 recently.
You have to wonder, if Bush is so macho, why is everyone selling dollars to buy Euros?
Because women control the purse strings in the 150 foreign countries invested in U.S.
This kind of capital flight occurred under Greenspan and Reagan in the summer of 1987.
Plunging U.S. dollar in 1987 was most influential cause after derivatives in '87 crash.

SOX closed 337.77 -6.70 (-1.95%) at 1.2% below trend. Stochastics sinking at 20%/54%.
If Elliott Wave analysis worked, Monday would have been the top for the SOX. Did I say
Elliott Wave analysis worked? No. Just said that Elliott Wave shows SOX peaking at 345.
Applied Materials will start down about a week before Intel, AMD, Texas Instruments do.
AMAT sells chip-making machines which Intel and all the others (except LSI) need to buy.
If Intel projects this quarter revenues $6.4 to $7 billion and comes in at $6.2 billion,
then SOX will be back to 265 in 3 months. The TV media is not telling all of SARS story.
Suppose the U.S. decides to disinfect every chip shipment from Taiwan entering the U.S.?

Stocks previously described in prior newsletters:
INTC closed 18.87 -0.29 (-1.51%) at 0.2% below neutral trend. Stochastics at 32%/55%.
AMD .closed. 7.25 -0.24 (-3.20%) Subscribers are holding AMD July 10 calls.
MSFT closed 25.75 -0.24 (-0.92%)
CSCO closed 15.22 -0.26 (-1.68%) at 0.3% below neutral trend. Stochastics at 21%/51%.
ORCL closed 12.10 -0.09 (-0.74%)
DELL closed 30.20 -0.44 (-1.44%) Subscribers were advised to cover short sales at 30.
SUNW closed. 3.74 -0.02 (-0.53%) Subscribers had raised Stops to 3.50 and were almost
stopped out Thursday when Sun Micro sank to 3.55, rallying to close above its uptrend.
Sun Micro is 1.6% above a 7-day moving average at 3.68, stochastics falling at 59%/70%.

ACN .closed 16.45 -0.32 (-1.91%) Subscribers are holding half of ACN May 15 puts bought.
BE ..closed. 8.42 -0.23 (-2.66%) Subscribers sold BE (was KCIN) short at 16 a year ago.
IBM .closed 86.05 -0.63 (-0.73%) Subscribers holding IBM July 90 calls.

Also, last year's recommendations Nortel at 0.48 (Oct.) and Lucent at 0.75 (Oct.) now:
NT closed at 2.70 -0.12 (-4.26%) and LU closed 2.21 -0.03 (-1.34%). Keep holding these.
Lucent traded about as many shares as Cisco did Wednesday. Cisco went down on earnings.

Stocks to buy on pullbacks, recommend to buy at 10% below April 23rd closing prices:
EBAY closed 93.27 -1.01 (-1.07%)
YHOO closed 25.08 +0.32 (+1.29%)
AOL .closed 13.16 -0.17 (-1.28%)

Stocks sharply higher this year, so-called momentum plays. If you buy, use a Stop Loss.
These darlings have been pushed higher by chart watchers who buy from new high lists.
I am not recommending these, just cautioning since they are widely touted by TV media.
AMZN closed 30.45 -0.25 (-0.81%)
GENZ closed 39.13 -0.43 (-1.09%)
AMGN closed 60.47 +0.92 (+1.54%)

Below have been recommended, and despite Nasdaq falling on profit-taking, they are up:
ELN closed 4.42 +0.36 (+8.87%) at 11.1% above terrific uptrend. Stochastics at 79%/88%.
Subscribers bought Elan at 2.85 and raised Stop Loss to 3.43. Raise Stop Loss to 3.98.
Elan left a large gap in Thursday's trading, and should fall to 4.10 level to fill it.
Elan Pharmaceuticals is a European firm (Ireland) with its ADR's traded on the NYSE.

PCLN closed 3.01 -0.17 (-5.35%) at 3.4% above an uptrend. Stochastics down to 24%/69%.
Subscribers raised Stop Losses to 15% off Monday's close 2.69 then raised Stop to 2.86.
Priceline traded as low as 2.90 on Thursday, but subscribers are still hanging in there.
Retail sales show consumers spent for two weeks after Baghdad fell, then disappeared.
Maybe America won't be taking a long-awaited trip to Yellowstone this summer after all.
Why would anyone leave for a trip when they can watch Cramer and Kudlow on TV at home?

LVLT closed 5.971 -0.129 (-2.11%) at 1.0% above an uptrend. Stochastics fell 59%/75%.
Subscribers bought Level 3 a week ago at 5.50, should have raised Stop Loss to 5.77.
See my Monday's commentary on Warren Buffet and his huge Level 3 junk bond position.
This stock is the most risky which subscribers are holding and merits most attention.

JNPR closed 11.90 -0.29 (-2.38%) at 3.0% above steep uptrend. Stochastics at 65%/75%.
I wrote buy a 10% pullback from Monday's intraday high near 12.69, competes with Cisco.
I recommended buy Juniper on pullbacks to 11.40 which is below a 7-day moving average.
These just won't pull back to accommodate sidelines buyers, despite weakness in Nasdaq.

NVDA closed 16.06 +0.01 (+0.06%) at 2.6% above a nice uptrend. Stochastics now 55%/60%.
I wrote this week to buy Nvidia at 15.20, below a 7-day moving average, on a pullback.
Thursday, NVDA traded as low as 15.65 in regular trading, but afterhours went to 15.20.
Subscribers bought NVDA at 15.20 between 4:30 PM and 5:00 PM on Redibook and Instinet.
After 5 PM, Nvidia announced lower quarterly earnings, and a new chip for release soon.

NVDA soared to as high as 18.13 by 6:00 PM, which is at the 18 target I wrote last week.
Subscibers who bought NVDA May 15 calls last week at 0.60 should close them immediately
at 3 or higher and roll up the proceeds into NVDA June 20 calls when available. If NVDA
goes to 30, June 20 calls will go to 10, and we can all rent a penthouse suite July 4th.
If the stock market falls apart, then we can keep eating at Taco Bell like we have been
since Bush became President. Where else can you get a 99-cent Chalupa outside of Mexico?
Only in the land of fast food and fun, where overweight teens now are suing McDonalds.
Remember that ranchers TV commercial that ran all day, "Beef, it's what's for dinner"?
Now, it reads, "Junk, it's what's for mealtime." MCD closed at 17.25 -0.14 (-0.81%).
Read more at
http://news.yahoo.com/fc?tmpl=fc&cid=34&in=health&cat=obesity_and_weight_issues

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