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 2107.43

Nasdaq WILL RETEST 1850
Sun., May 13, 2001

******************Commentary*******************
May 13. Nasdaq has been flat since Apr. 20 but INTEL (down 13.8%) ORACLE (down 19.5%), WCOM (down 7.5%), DELL (down 18.7%) have fallen sharply as the Composite Index fell a modest 2.5%. During the last 2 months, CISCO rallied 40% from Nasdaq's low of 1620, and held on to its gains despite daily televised predictions of further huge CISCO declines by incredibly inaccurate Lehman Analyst Dan Niles who one year ago publicly predicted that INTEL WOULD RISE TO a record valuation of $87.50 by Dec. 31. INTEL ended last year at $30. With Lehman forecasts like this many missed Nasdaq's 30% April run. Nasdaq has a short-term downside bias with more selling on Monday, forecasted by negative short-term MACD and neutral stochastics at 23.41/13.05% (vs 41.59/54.63%). A more serious sell signal has been generated by intermediate (90-day Nasdaq chart) MACD becoming negative, stochastics plunging at 13.06/67.62% (vs 92.15/77.10%). This is very similar to the situation March 8 prior to a Nasdaq 2-day free-fall from 2170 to 1925. Longer-term (2-yr Nasdaq chart) MACD remains positive, but stochastics are over-bought 78.16/33.08% (vs 55.86/15.66%). Nasdaq is about to fall to RETEST THE 1850 LEVEL. INTEL stochastics are very over-sold at 3.18/55.56% (vs a very over-bought 98.64/65.87%). INTEL is range-bound $26-32. MICROSOFT MACD, RSI are negative, and stochastics are falling at 39.56/73.18% (vs extremely overbought 86.91/88.39%) thanks to Bill Gates selling another million shares April 30. If Gates thinks $71 is a good price to get out, why hold MICROSOFT, which gapped at $62 on March 16? MICROSOFT negatives forecast a quick move down to fill that gap. CISCO MACD, RSI are positive, stochastics are neutral 61.00/72.85% (vs over-bought 94.29/68.61%). Cisco is in a two-quarter loss period due to excess inventory writedowns. This limits Cisco upside to $23. ORACLE completed a $21 top. Oracle MACD, RSI are negative, and stochastics are diving at 16.10/33.93% (vs over-bought 85.19/71.65%). WORLDCOM stochastics are neutral at 18.41/17.53% (vs a negative 44.64/70.53%). Overhead resistance at $20 allowed many to distribute. DELL MACD, RSI negative, stochastics plunging at 13.38/19.34% (vs extremely over-bought 83.05/78.08%). Falling PC margins hurt DELL. Dan Niles (Lehman Bros) favorite stock has been COMPAQ at $22, announced last month on CNBC. COMPAQ has lost 28% since then. Sun Micro stochastics are neutral at 47.56/66.61% (vs an over-bought 86.84/64.10%). Nasdaq will fall on Monday, trade sideways Tuesday until the Federal Reserve announcement. The markets expect 50 basis points (1/2 point rate cut). Anything less will send stocks tumbling. CISCO, up 40% since Apr. 6, is the lowest risk of the big-cap leaders. With Nasdaq's rally capped at 2200, diversify-CANADIAN STOCKS!
Japan ADRs have noticeably outperformed for eight weeks
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