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 1403.80

July 2, 2002 - Blame the Government?

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July 2. Go To Page 1. Nasdaq Composite closed at 1403.80 on July 1.
Nasdaq has fallen 139.16 points (9.0%) since my June 19 online page.
Intel closed 17.54 -0.73 (-4.0%) below its moving average resistance at 18.70. RSI, MACD negative, stochastics plunged to extremely over-sold at 2%/25%. I have been recommending Intel for one month on any dip below 18, here it is. Early November 1999, Merrill Lynch downgraded Intel at 80 (pre-split), trashed it to 72, and then 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, 2002, comparing it to a Japanese real estate bubble when Osha worked in Japan for 5 years, in his CNBC spot. Summer seasonally slow for chip-makers Intel and AMD, now is the time to buy. Competitor AMD is operating at the B/E level, should be profitable in the 4th Quarter.
Microsoft closed 52.66 -2.04 (-3.7%) below moving average resistance 53.95. RSI, MACD negative, stochastics falling to neutral 30%/70% from over-bought. Microsoft settled its case with the SEC regarding earnings manipulation that would put any other corporation out of business. How did they get off, unlike ENRON? The U.S. Justice Dept. does not have the time nor manpower to spend on them. 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 restore 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.
Cisco closed 13.09 -0.86 (-6.2%) below moving average resistance at 13.75. RSI, MACD negative, stochastics in neutral at 32%/60% from over-bought. When Nasdaq made a short-term bottom on May 7, funds gapped Cisco to 16. Since then it has agonizingly slowly consolidated, trying to completely fill its chart gap. Cisco had a huge chart gap from 13.50 to 15.15 which now has been covered. Cisco is the most widely owned and by far, most overvalued stock on Nasdaq, avoid it. Suffers from a poor management and a commodity business in a stagnant market. Cisco grew by acquisitions just like Worldcom and AOL, once it had bought up all the small networkers worth owning and had none left to buy, the stock price fell. Christopher Byron, National columnist for the New York Post said on CNBC there was no national outcry when the stock market was going up. I wrote about excessive Price/Earnings ratio for Cisco and growth by acquisition for over 2 years.
Oracle closed 9.00 -0.47 (-5.0%) below moving average resistance at 9.02. RSI, MACD positive, stochastics fell to neutral at 50%/78% from over-bought. Oracle, like Microsoft, has peaked in its long-term product development cycle. There is no growth in a database management software business, its bulk of sales. In the past year, major defections by key Oracle management limited its future. With year-to-date IT spending growth non-existent, strictly an underperformer. To top it off, government spending has been redirected to Texas firms (Dell). That is just what Larry Ellison gets for supporting those Clinton campaigns in past. Despite that, Oracle stock rocketed from 7.20 to 9.90 in June on expectations. This stock is a great candidate for July put options on a trip back below the 7.50 strike price.
Dell closed 25.16 -0.98 (-3.7%) below moving average resistance 25.20. RSI, MACD are negative, stochastics remain extremely over-bought at 70%/82%. 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. Every time the media reports on Niles downgrades these days, Nasdaq falls. I tracked Lehman's analyst and he has never been correct in the past 2 years.
Sun closed 4.72 -0.29 (-5.8%) below its moving average resistance at 5.09. RSI, MACD negative, stochastics turning off to deeply over-sold 18%/32%. Sun makes servers for the Internet infrastructure. With Bush's team in and Clinton's agenda history, oil firms get the bucks, and Internet dot.com goes broke. Government slapped Microsoft on its wrists for its monopoly, Sun was shafted. Now Dell wants to get into Sun's line of business. Once the darling of Nasdaq, Goldman Sachs has downgraded Sun continuously for over one year.
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