STOCK MARKET DIRECTION Email Edition for June 19, 2002
published by Steve Zito 6:00 AM EST June 19, 2002 all rights reserved

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Nasdaq Composite Index closed at 1542.96 on Tuesday, June 18, 2002
Nasdaq has risen 38.22 (2.5%) since my last newsletter June 17, 2002.

Have you seen new Morgan Stanley commercials with a Chinese female
employee extolling the virtues of moving money to "the nation of China?"
Amazing how Wall Street pushes China investment instead of the USA,
and in the same breath, announces thousands of layoffs in New York City.
Nice to know Morgan Stanley thinks Americans can all pick up and move
to Communist China. Hey, Morgan, China is still a dictatorship, yes?

This while Morgan Stanley downgrades IBM (already down 36% this year)
too late, citing weak spending for hardware. IBM commercials label them
as an "E-business services firm." You know the ad, with the grizzled coach
gloating about "what a season it was," and then stating, "in E-business, there
are no off-seasons." So which is it, seasons or no seasons? The logic in this ad
is not very seasoned. In fact, when E-business consultants (Accenture, IBM,
KPMG, Deloitte Consulting) entered the dot.com arena in late 1999, that is
the period of time when the Internet boom died and Nasdaq's bubble with it.
Internet firms did great without consultants in 1995-1999, who needs 'em?

Can good stock picking and active management come back into vogue today?
This is what the endless parade of so-called experts repeatedly ask on CNBC.
Probably not, as greed rules Wall Street, not consideration for small investors.
Just watch any stock brokerage commercial these days. Charles Schwab has,
"Let's put some lipstick on this pig," implying competitors employees sell pigs.
Not really, but most major networks won't run this blatantly offensive TV ad.

At AIG, "we believe the greatest risk is not taking one." AIG commercials say
no one ever got anywhere without taking the risk. Obviously no AIG employee
had their life savings in Enron or Global Crossing. Now Cantor Fitzgerald
has commercials all day asking people to give them business so that families
of World Trade Center employees can receive money if the brokerage profits.
No mention if Cantor plans to offer assistance to their former customers who
lost everything in worthless dot.com investments recommended by their firm.

In fact, no brokerage will give anything back to investors who were scammed
unless those victims file arbitration, which requires $500 as a minimum to start.
That will cover the hearing fee deposits with the Exchange and for photocopies
and postage. It will not cover attorney's fees and the cost of your time. With
arbitration panels consisting of former brokerage and industry employees, the
chances of success for the small investor fall below 50%. Think about this the
next time you see a brokerage commercial offering 10 free trades for the month.
If your broker screws up your order, you get stuck with the loss and arbitration.

On a 10-day chart, Nasdaq is 0.3% below moving average resistance at 1546.
RSI and MACD about to turn negative with stochastics extremely over-sold.
Tuesday, stochastics finished at 0%/18%, falling all day. Nasdaq opened 1566.
Short-term, Nasdaq will go down, waiting for any surprise economic catalyst.
Monday shorts were caught by the gap open at 1526, and covered for 2 days.
Happens every month one week before the stock and index options expiration.
With the 21-point gap from Nasdaq 1505 to 1526, expect pullback to that level.

On intermediate 90-day, Nasdaq is 0.6% above moving average support 1533.
90-day RSI, MACD negative from May 28, beginning of most recent declines.
There has been a mid-month rally for one week every month for the last three.
The last 2 mid-month rallies in April and May averaged 7.8% gains in a week.
Same 8.3% from Friday's Nasdaq opening low at 1445 to Tuesday's high 1566.
These rallies entirely related to arbitrage on expiring stock and index options.
Bullish 90-day stochastics quickly fell from over-bought Tuesday to 78%/78%.
Expect options causing weakness to Friday, with major trend reversal Monday.

Long-term Nasdaq moving average resistance is 1585. Nasdaq longer-term
moving average is now at the lowest levels for this 22-month Bear Market.
Nasdaq has been trashed for two years by the same Wall Street brokerages
who preached 10,000 for Nasdaq. When Nasdaq makes real Bull breakout,
average weekly gains for the first three weeks should normally exceed 10%.
If it started next week, Nasdaq would tack on 160 points for three weeks,
and in the first month, get back close to 2000, where it started year 2002.
Sound implausible? Check Dow chart for August 1982 or January 1987.
RSI, MACD negative, stochastics rising from very over-sold to 32%/22%.

Technical Analysis- Intel, Microsoft, Cisco, Oracle, Worldcom, Dell, Sun

Intel closed 22.02 -0.54 (-2.4%) below moving average resistance 22.30.
RSI, MACD negative, stochastics now falling from over-bought to 70%/76%.
Play Intel for an over-sold bargain on a dip below 18 in the next two months.
In November 1999, Merrill Lynch downgraded Intel at 80 (pre-split), trashing
it to 72, and over the following 6 months Intel went straight up to 144 (pre-split).
Joe Osha replaced the 1999 Merrill semi analyst, and has been similarly wrong.
Merrill Lynch Joe Osha downgraded it on June 13, comparing it to a Japanese
real estate bubble when Osha worked in Japan for 5 years, in a CNBC promo.
I studied Intel for 6 years in university, they are not in the real estate business.
Summer seasonally slow for chip-makers like Intel and AMD, time to buy low.
Putting Intel at 18 and AMD at 7 on the recommended list for semiconductors.

Microsoft closed 55.99 +0.31 (+0.6%) above moving average support 54.65.
RSI, MACD positive, stochastics very over-bought at 90%/86% for past 7 days.
Microsoft just settled with the SEC regarding earnings management that would
put another business corporation out of business. How? Microsoft's 600 lawyers.
The U.S. Justice Dept. does not have the time nor manpower to spend on case.
The 9 holdout state attorney generals will settle in similar type of appeasement.
Why? Microsoft can bring jobs to their states, and that is the bottom line. Jobs.
Microsoft is relying on its X-box and dot.Net initiative to save sagging growth.
If you want to make money in Internet games, buy the game suppliers directly.
Microsoft advertising it has 70 game titles available for the X-box from vendors.
What kid would not want to play Spiderman, Be Like Mike instead of reading?

Cisco closed 14.71 -0.36 (-2.4%) below moving average resistance 15.00.
RSI, MACD negative, stochastics now neutral up from over-sold at 44%/34%.
When Nasdaq made a short-term bottom on May 7, funds gapped Cisco to 16.
Since then it has agonizingly consolidated, trying to completely fill that chart gap.
Cisco has huge chart gap from 13.50 to 15.15 still partially left from the May 7.
Traders won't touch Cisco until it closes in on 13.50, then they will gap it to 16.

Oracle closed 8.98 -0.22 (-2.4%) above moving average support at 8.70.
RSI, MACD positive, stochastics easing slightly from over-bought 83%/77%.
Oracle, like Microsoft, has peaked in its long-term product development cycle.
There is no growth in database management software business, bulk of sales.
In the past year, major defections by key Oracle management limited future.
With year-to-date IT spending growth non-existent, strictly average stock.
To top it off, government spending has been redirected to Texas TECHS (Dell).
That is what Larry Ellison gets for supporting those Clinton campaigns in past.

Worldcom closed 1.56 +0.11 (+7.6%) below mov. aver. resistance 1.60.
RSI, MACD positive, stochastics rising from over-sold to neutral 40%/29%.
Let's see, Peter Lynch comes on TV and says buy Fidelity Investment funds.
Should you sell your Worldcom stock and put the money into diversification?
If you do, you are supporting the very funds which caused your stock to drop.
Like Global Crossing and Metromedia FN, mutual funds dumped Worldcom.
But surprisingly, French funds have bought about 10% on a June 7 turnaround.
Removed from S&P 500 Index in May, proof "buy and hold" does not work.
Announced its tracking stock, MCI, will be recombined with parent this July.

Dell closed at 26.71 +0.03 (+0.1%) above moving average support 26.40.
RSI, MACD neutral, stochastics rose from neutral to over-bought 90%/78%.
Two years ago, CNBC paraded analysts daily recommending Dell over 50.
Biggest CNBC bull 2 years ago was Lehman's Dan Niles (strong buy at 53).
Niles pushed Compaq at 22 a share a year ago, advised sell Intel at 19 too.
Question, why does anyone listen to him? Niles worked for Compaq 8 years.
Claimed on CNBC that he does not own stocks he pushed (Compaq, Dell).
Have to wonder, in 8 years, has he friends with Compaq retirement plans?

Sun closed 6.35 +0.07 (+1.1%) below moving average resistance at 6.36.
RSI, MACD negative, stochastics rising sharply to over-bought at 80%/52%.
Sun makes servers for the Internet infrastructure. With Bush's team in and
Clinton's agenda history, oil firms get the bucks, Internet dot.com goes broke.
After all, Silicon Valley located in Democratic California, hurting Oracle, Sun.
Government slapped Microsoft on its wrists for monopoly, Sun was shafted.
Dell wants to get into Sun's line of business. Dell is located in Austin, Texas.
For my foreign readers, Austin, Texas is the home of U.S. President Bush.

Thanks for reading Stock Market Direction by Steve Zito.
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