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 solely relied on in your investment decisions.
Nasdaq May 21 *Peregrine Sitemap Intel *New Subscribers $10

NASDAQ COMPOSITE
INDEX closed 1697.63

May 24, 2002 - Nasdaq will Retest 1600

******************Page ONE*******************
May 24. Go To Page 2 Nasdaq Composite closed at 1697.63 -May 23. Nasdaq has fallen just 3.96 (0.2%) since May 21. CNBC Ron Insana proclaimed the new Bull Market today based on improving Advance-Decline line since beginning of year. Former CNBC technical analyst John Bollinger explained you take the absolute number of advancing issues, subtract the absolute number of declining issues, divide result into the total number of issues traded, on weekly basis. A/D RESULT is then plotted on a chart to determine market trends over time, trend of the A/D result for the broad Nasdaq market has been up this year. A trend for the Dow Jones A/D result has been sideways for 2 years. Bollinger explained the difference in a rising trend for Nasdaq versus sideways trend for Dow as money flow to small-capitalization issues from large capitalization issues, such as Dow growth stocks. First, to criticize these so-called experts who appear non-stop on CNBC, the Dow Jones Industrial Average is a price-weighted average, and the Nasdaq Composite Index is a market capitalization-weighted index, and comparisons (often made by CNBC Stocks Editor Joe Kernen) are ridiculous. When high-priced Dow stock Proctor & Gamble-PG moves 5 points, it has the same effect as 5-point moves in low priced issue General Electric for calculating the Dow Jones Average which moves on absolute price. By contrast the larger Nasdaq stocks move that Index based on market size of component. Nasdaq declined 65% in 2 years as its largest firms (Worldcom, Sun, Oracle) suffered huge price drops, not its small-caps. The Dow and Nasdaq are calculated differently, and cannot be compared. Today Sun Microsystems and Intel actually moved down, while Nasdaq roared ahead 50 points the final trading hour. One sector, biotechnology, including many very large capitalization issues like Biogen, was responsible for skewing the Nasdaq higher. Most likely, a combination of short-covering by large hedge funds who have trashed Biotech (biotech companies do not have profits) and bargain-hunting growth funds now looking to take money out of telecommunications. Fund managers know a sad fact, biotech is not able to burn cash faster than telecommunications. Nasdaq roared from 1644 at 2:45 PM to 1697 at Thur. 4:00 PM closing. So TV announcers called it something significant, wildly promoting momentum and A/D lines but failed to realize when Nasdaq soars 50 points in one hour, it is more likely to fall the next day than continue that type of surge. Imagine if you threw a ball into the air very hard, would it be more likely to go ever higher or to promptly fall right back to the ground? Then you might ask, how did Nasdaq ever manage to climb as high as 5200 in March 2000? Promotion by TV financial news in concert with their largest advertisers, the stock brokerages and mutual fund investment groups. Pure hype, not much different from a kind of advertising used to sell tickets for Star Wars Clones.
How to Use Site. Innocent Arthur Andersen. Top Nasdaq Big-Caps
Copyright Notice, all pages Copyright©2002 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.