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.
SMD July 8 How To Trade Index INTEL Review STOCK PICKS

NASDAQ COMPOSITE
INDEX closed 1962.79

Will Nasdaq Successfully Test 1950?
Tue., July 10, 2001

******************Commentary*******************
July 10. In the short-term, Nasdaq showed a serious failure to sustain a higher opening as short-sellers and hedge funds jumped on Nasdaq at 2044 and crushed it. Merrill Lynch announced today that Merrill analysts could no longer "own the same stocks" on which they make recommendations. Goldman, Lehman, Morgan and Merrill Lynch are brokerage analysts who have downgraded Nasdaq technology stocks for months. If they have been telling the public to bail out, why would these analysts still own any Nasdaq technology stocks? Most of the Internet darlings from last year are down 95%, so it's unlikely analysts still own them. The intermediate Nasdaq chart shows a serious break bringing its Moving Average to lowest point since mid-April, almost completely filling the April 18 gap around the 1945 level (1944 -1984). RSI continues to decline, MACD remains negative. The only bullish fact is that intermediate stochastics are completely over-sold as they were prior to the last 4 rallies, three of which lasted exactly five days. Earnings for tech stocks are dismal, worst in ten years. Cable media tells you over and over that stocks turn up before earnings improve. What if one year stocks went up AFTER the tech earnings got better? Suppose the earnings NEVER get better? Suppose Argentina defaults on its loans to U.S. money center banks(overvalued financial stocks)? Don't play the news. Play the longer-term Nasdaq chart stochastics, which are quite similar to stochastics last November and in mid-June. EXPECT another Nasdaq 5-day over-sold RALLY to begin Thursday. INTEL rallied off $26 five times since April 17 and topped out $31-$32, stochastics most over-sold in 3 months. MSFT hit $72 five times since April, only this time has sold off to extreme over-sold levels with RSI lowest in 3 months. Cable TV media played up the June appeals court ruling as bullish (LOL) when obviously it's bearish. Support is at $62. CISCO's latest decline started when Jim Cramer said on CNBC that he bought it near $20. RSI, MACD are negative, yet stochastics very over-sold. CISCO suffers from news that Corning (GLW) does not see networking recovery for at least 18 months. The largest brokerage mutual growth funds are dumping telecom, optical fiber, networking. Classic "you buy some of the hottest technology while they sell out" ORCL traded at $20 four days last week, and short-sellers just love it now. RSI, MACD just went negative, stochastics plunged to deeply over-sold. ORCL has a gap to fill at $15.40-16.40. Larry Ellison sees growth in applications S/W, but is dependent on database products. WCOM is the only big-cap leader showing strength technically at the bottom of a $14-20 trading range. RSI and MACD turned positive. DELL RSI became negative, stochastics falling to over-sold but risk of more downside due to overvaluation of PC stocks in general. Pay attention to any future news about layoffs. SUN stochastics deeply over-sold and MACD, RSI negative. SUNW collapsed when Goldman Sachs analyst Laura Conigliaro downgraded it May 29 at $20/share.
Diversify to JAPAN ADR's or look North for CANADIAN STOCKS.
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