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 1535.48

June 10, 2002 -Nasdaq has buyers at 1500

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June 10 Go To Page 1 Nasdaq Composite closed at 1535.48 on June 7.
Nasdaq has fallen 27.08 (1.7%) since June 4 page. Growth in the U.S. economy is a far better predictor of U.S. stock prices than any other tool, and the employment data from the Bush administration tells us the economy is improving. Ignore that automobile sales were down 10% in May, as purchase incentives ended. Forget mortgage rates are historic lows, reflecting soft demand for new housing loans. So what if Investment Technology corporate spending is non-existent. Labor Dept. Chao said Friday 41,000 new payroll jobs were created in May. At last Fall's lows, CNBC was urging viewers to buy GE from $38 to $39. Maria Bartiromo reported (floor of NYSE) "folks, GE is a steal." Today, GE is closer to $30 where it should be. House that J. Welch built is one built on the same accounting gimmicks that recently sent IBM to $80. On a 10-day chart, Nasdaq stochastics over-bought at 55%/68%, rising all day from a morning drop. Short-term, Nasdaq will do nothing, waiting for surprise economic catalysts. On intermediate 90-day charts, Nasdaq is 2.6% below its 90-day moving average 1577. Intermediate RSI, MACD went negative 2 weeks ago as Nasdaq broke 1624. The 1624 level will be day-trader target for an intermediate move. That one-time "summer rally" will begin when Nasdaq crosses I/M moving average, which is 1577 but trending down 9.5 points per day (0.6%). 90-day stochastics plunged from over-bought on May 17 to neutral 32%/30%. Nasdaq rarely gets over 4% from its 90-day moving average, so a rally is due. Those investors with 6-month to one-year horizon should be investing now. Fed will keep rates low, more fiscal stimulus will cause an end-of-year boom. Long-term Nasdaq moving average resistance is 1624. When Nasdaq makes a genuine Bull move, weekly gains in the first weeks will exceed 10%. If it started next week, Nasdaq would tack on 160 points for 3 weeks, and in the first month, get back just over 2000, where it started this year. Individuals waiting to jump in, pessimism levels are indicative of a bottom, evidenced by excessive readings in the VIX Index last Friday. In addition, there has been a mid-month rally every month for last 3 months. Look for base-building at current levels. Intel RSI, MACD negative, falling 0%/41% stochastics forecasting more selling. Play Intel for an over-sold chip bargain on any dip below 18 in the next two weeks. Merrill Lynch's Joe Osha downgraded it on CNBC, comparing it to a Japanese real estate bubble when Osha worked in Japan for 5 years, in interviews Thursday. Microsoft RSI negative, MACD positive, but stochastics over-bought 82%/71%. Owner Bill Gates now in process of dumping 15 to 20 million shares. Cisco has huge chart gap from 13.50 to 15.15 to fill. When funds start dumping Cisco, that will be a market bottom.
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