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 for your investment decisions.
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NASDAQ COMPOSITE
INDEX closed 1562.56

June 4, 2002 - Nasdaq to hit BOTTOM soon

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June 4. Go To Page 2 Nasdaq Composite closed at 1562.56 on June 3.
Nasdaq has fallen 135.07 (8.0%) since May 24. Based on new claims for unemployment filed during May, unemployment rate 6.2% could be reported on June 7. Big-time money players will be waiting to buy what the public starts dumping on any Friday morning panic selling. The Labor Dept. headed by Elaine Chao will do its best to manipulate numbers by adding seasonal summer workers to increase the size of the U.S. labor pool effectively reducing an unemployment percentage. In coming months, U.S. interest rates will be held down by a Federal Reserve that is forced to address ever growing number of corporate layoffs announced the past week. Lower interest rates mean higher stock prices. Any gap down on Friday followed by big turnaround will get Wall St. stockbrokers pushing traditional "Summer Rally" in next 2 weeks. What a CNBC promoting MOMENTUM and A/D lines fails to realize is when Nasdaq crashes, it is more likely to rise the next day than to continue that type of excess fall. Imagine if you smashed a ball into the ground hard, would it be more likely to dig a hole, or to promptly bounce back above your head? Then you may ask how did Nasdaq manage to fall so far if the economy is now improving? Well, the economy is only improving for upper middle class with real estate. Poor and lower middle class limited by credit card debt and bad jobs. On a 10-day chart, Nasdaq is 1.1% below moving average resistance 1580. RSI, MACD very negative, and stochastics fell to an extremely over-sold. Monday, stochastics finished at 5%/6%, the very low of a stochastic range. Short-term, Nasdaq will regain 50% of Monday's 53.17 point plunge. Chart gap from 1582 to 1636 left May 8 was filled Monday as Nasdaq closed at new low for the year. On intermediate 90-day, Nasdaq is 3.8% below its 90-day moving average resistance 1624. Nasdaq has been punished by big-time hedge funds shorting Biotech, and funds dumping telecom. Intermediate RSI, MACD went negative week ago as Nasdaq broke 1624. This 1624 level will be the traders target for next intermediate bounce. 90-day stochastics have plunged to 0%/16%. Nasdaq rarely gets more than 4% from its 90-day moving average, nice rally is coming. Those investors with a 6-month to 1-year horizon should be buying now. Long-term Nasdaq moving average resistance is 1624. Nasdaq could now try to make bottom for 2-year Nasdaq Tech Stock Bear Market. Short and intermediate charts never showed Nasdaq declining below 1600 but long-term charts did. When Nasdaq makes a new Bull move, average weekly gains for the first three weeks will normally exceed 10%. RSI, MACD negative, stochastics plunged to deeply over-sold 0%/22%. Individuals waiting to jump back to tech, Nasdaq pessimism levels indicative of a bottom.
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