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 June 19 How To Trade Index Dell Report STOCK PICKS

NASDAQ COMPOSITE
INDEX closed 2034.84

Nasdaq GETTING READY for Rate Cuts
Sat., June 23, 2001

******************Commentary*******************
June 23. Big-cap Nasdaq tech stock weakness ended with over-sold bounces in Intel, Cisco and Oracle. It was not surprising in light of previous week decline, Nasdaq's worst week of the year (down 8.4%). Investors want stocks deemed "safe" and want "tech" exposure in portfolios. How to achieve this? They buy Intel, Cisco and Oracle, ignoring idiotic cries of Lehman's senior analyst predicting "doom and gloom" for semiconductor, networking stocks. ORCL investors conveniently forgetting how Larry Ellison burned his shareholders March 1 with his earnings warnings 4 days after his VP's reaffirmed guidance. Last week, telecommunications equipment stocks plunged to test April lows. Guess what? Failed miserably on slew of brokerage house downgrades. Former darlings crashed to 3-year lows (Lucent all-time low). What is happening? Banks, financials, General Motors are close to highs. Volume leaders on Nasdaq this week were Internet infrastructure and communications networking stocks Exodus-EXDS, Level 3-LVLT and Metromedia Fiber Network-MFNX which sank to liquidation prices. These high-growth stocks showing average loss of 77% since May 2. Why are these stocks crashing when the Federal Reserve is about to lower interest rates for the 6th time? Simply, very large mutual funds and institutions are dumping the Internet/telecom eqpt. stocks in panic-selling, loading up on financials before interest rate cut. Both Fidelity Investments and Janus Funds began dumping shares of them in Jan. and Feb. according to SEC filings (EDGAR). Brokerage house analysts, wrong about tech stock target prices for 2 years, have seen their downgrades in the past 2 weeks mark the final chapter in a long tale of misleading the public. Congress is currently investigating brokerage house analysts and their over-blown target prices for stocks they may have owned at a time of recommendation last year. In mid-April, Lehman's analyst Dan Niles said his favorite stock was Compaq Computer-CPQ at $22 in TV interview with ego-manic Maria Bartiromo. Compaq Computer has fallen 39% to $13.50. Nasdaq 10-day stochastics lower at 13.70/55.75% (vs the weakening 21.20/28.02%). Nasdaq made 3 successive tries at breaking 1980 this week and failed despite total capitulation in telecom equipment stocks as overall market volatility ebbed and daily trading range shrank from 80 points to 40 over 6 trading days. MACD, RSI remained negative, suggesting another try at Nasdaq 1950, unfilled gap which remains from April 18. Nasdaq 90-day stochastics confirm the downtrend in place for 2 weeks, but over-sold condition eased at 26.38/21.06% (vs very over-sold 5.03/35.62%). How low can Nasdaq go? Two more 40-point days on the downside seem likely before the Federal Reserve cuts interest rates Wednesday. Nasdaq 2-year longterm stochastics still falling but neutral at 36.08/70.23% (vs the 26.88/69.31%). INTEL, MSFT, CSCO, ORCL, WCOM, DELL and SUNW RSI, stochastics MACD here Sun., June 24. Diversify north-CANADIAN STOCKS.
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