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 27 Nasdaq May 20 Index DELL Report Subscriptions

NASDAQ COMPOSITE
INDEX closed 2084.50

Nasdaq Completely Over-Sold
Wed., May 30, 2001

******************Commentary*******************
May 30 Goldman Sachs downgraded SUN on Tuesday before Nasdaq opened, killed the expected rally. Not only did SUNW plummet, took entire Nasdaq with it for two days! Just 5 months ago, Abby J. Cohen (Goldman Sachs) PREACHED that the S&P 500 was going to 1650 which makes it 32% below what Goldman's director predicted is "fair value". Now Goldman tells earnings going to plunge for tech stocks. Morgan Stanley downgraded telecommunications today. Have stock fundamentals changed on the weekend? No! Merrill Lynch cautioned on Europe. Fact is, US dollar so strong vs European currency (Euro), European tech firms likely to take market share from U.S. firms. In past 5 trading days, an overbought condition in Nasdaq has evaporated as investors fled on Goldman and Morgan Stanley downgrades. Hardest hit were SUN and CISCO. Microsoft appears to be distributing at $71, price at which Bill Gates sold large block in April. INTEL, ORACLE, WORLDCOM and DELL have declined substantially since Apr. 20 in major Nasdaq rally. Blame insider stock selling, zero confidence in management, falling personal computer sales, whipsawed markets on broker hype. Nasdaq short-term (10-day) stochastics are most over-sold this year, rock bottom at 6.68/6.28% (vs plunging 20.65/47.33%. Forecasts immediate sharp RALLY. Short-term RSI also lowest this year, index has major gap to fill at 2160. Intermediate (90-day chart) stochastics very over-sold at 9.82/71.83% (vs neutral 72.06/69.97%). Support at 2060, over-sold bounce inevitable. Longer-term (2-yr chart) Nasdaq broke support (moving average) after 4 weeks above it, but stochastics still slightly over-bought at 65.62/56.52% (vs very over-bought 89.13/51.19%). Last week, I had warned Nasdaq vulnerable to major sell-off in 2 weeks but stock prices reflect ALL FUTURE CASH FLOWS, not just business conditions in 2nd Qtr. INTEL closed near bottom of $26-$32 trading range, stochastics completely over-sold at 4.96/48.04% (vs 66.16/46.16%). Buy it now! MICROSOFT's revenue model to be announced tomorrow but weak stochastics fading fast at 41.72/52.15% (vs over-bought 78.71/44.54%). MACD negative for 4 weeks, RSI fading too. CISCO was in a beautiful upward trend until Goldman killed the market. Stochastics over-sold at 13.49/66.04% (vs neutral 65.04/68.83%). MACD, RSI just turned negative. ORACLE's shareholders worried about repeat of March earnings disappointment. RSI, stochastics over-sold at 1.47/42.88% (vs a bearish 34.53/46.08%). Buy it for a good bounce. WORLDCOM has no upside potential, RSI fading, stochastics plunging 16.87/48.68% (vs falling 54.10/46.13%). Mutual fund managers got burned on DELL. RSI failing, stochastics crashing at 20.74/66.51% (vs 89.10/63.97%). Avoid PCs, PC software. Sun Micro very over-sold at 3.30/60.04% (vs neutral 52.82/60.16%).
Diversify into foreign, natural resource and CANADIAN STOCKS.
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