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 May 20 Nasdaq May 13 Index DELL Report Subscriptions

NASDAQ COMPOSITE
INDEX closed 2251.03

Nasdaq READY TO ADVANCE
Sun., May 27, 2001

******************Commentary*******************
May 27. Nasdaq short-term stochastics are the same as they were on the day of the May 15 Federal Reserve interest rate cut. That was the day before a 9.3% Nasdaq rally began. In past 3 days, an overbought condition eased as investors fled to the sidelines afraid to place bets pending the outcome of important tax legislation and confusion over gridlock in the Senate. Since April 20 the only Nasdaq bigcap leaders moving out above the rest were CISCO up 15.1%, and SUN up 3.9%. Since then, Microsoft has traded sideways at $71, the price at which Bill Gates sold in April. INTEL, ORACLE, WORLDCOM and DELL have actually declined an average of 10.4% since Apr. 20 as Nasdaq advanced 4.1%. Blame XP product delays, insider stock selling, zero confidence in management, levelling off in personal computer sales, broker hype such as overpaid Lehman Brothers Analyst Dan Niles, who downgraded CISCO weeks ago. Since Apr. 6, CISCO has led all large-cap tech stocks, gaining 61.8%. Will CISCO continue up? Yes. Nasdaq short-term stochastics are over-sold, falling at 20.65/47.33% (vs bullish and rising 79.59/52.05% that was reflective of the abrupt shift in investor sentiment from "sell the rallies" to "buy the dips"). Intermediate (90-day Nasdaq chart) stochastics are far less bullish at 72.06/69.97% (vs bullish 89.34/55.94%). Long-term (2-yr Nasdaq chart) Nasdaq remained above support (moving average) for a fourth week, but stochastics still over-bought at 89.13/51.19% (vs 94.49/42.40%). Nasdaq is vulnerable to a major sell-off two weeks from now on 2nd Quarter earnings reports. Remember, stock prices reflect ALL future cash flows, not just business conditions six months from now (often preached by media morons). INTEL closed just on support 2nd week in a row. MACD, RSI remain very neutral but stochastics positive at 66.16/46.16% (vs 42.64/33.11%). INTEL rangebound $26-32 near term. MICROSOFT unable to break $72 as MACD is negative, stochastics are over-bought at 78.71/44.54% (vs 17.14/46.43%). I did recommend this stock at $47 in Dec. Now, it is time to dump it. Put the money into CISCO which is in a beautiful upward trend with MACD, RSI bullish, stochastics slightly bearish at 65.04/68.83% (vs bullish 71.63/64.44%). ORACLE gave back all of Monday's gain, RSI is very negative, with stochastics falling at 34.53/46.08% (vs rising 39.52/37.02%). Avoid it. WORLDCOM has no upside potential, bearish RSI, stochastics are falling 54.10/46.13% (vs neutral 27.03/25.54%). Mutual fund managers are jumping on DELL as MACD, RSI turned positive, but stochastics are very over-bought at 89.10/63.97% (vs 40.25/31.14%). Avoid all PC stocks. Sun Micro advanced sharply with its bullish MACD, RSI but stochastics soft at 52.82/60.16% (vs an over-bought 89.10/55.07%). CISCO, up 61.8% since Apr. 6, is the best value of big tech stocks. Diversify now into GOLD, RESOURCE, and CANADIAN STOCKS!
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