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 1382.62

July 15, 2002 - Tech Stocks Trashed by Brokers

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July 15 Go To Page 1. Nasdaq Composite closed at 1382.62 on July 15.
Nasdaq has risen 8.19 (0.6%) from July 11, see July 11 online posting.
On the 10-day chart, Nasdaq is 1.7% above its short-term moving average support at 1360. Daily RSI, MACD became positive for only third time in two weeks. Short-term stochastics are very over-bought at 100%/65%, forecasting an opening pullback Tuesday morning. Any violation of 1328 short-term will lead to capitulation. The intermediate 90-day chart shows Nasdaq just 0.1% below its intermediate moving average resistance 1384. The downtrend is clearly evident in the 90-day chart, and any pullback with a lower close on Tuesday will confirm renewed selling. Recent lows at 1319 exceeded the lows last September 2001 when NYSE Dick Grasso forced closure of all U.S. stock exchanges in conjunction with approval of tepid Paul O'Neill. That one-week market closing (Sept. 11-17) wiped more value out of Nasdaq than the last 61 days of trading which produced a 418-point loss (23%) from April 17. Intermediate RSI negative, MACD positive, stochastics now rising to neutral 68%/48%. Long-term Nasdaq is 5.9% below moving average resistance at 1470. That level has to be crossed over to break the back of the bear. RSI, MACD negative, 2-year stochastics rising to 24%/25% from low enough in mid-June to make a bottom, but note failure on June's rally.
Intel closed 19.12 +1.13 (+6.3%) above its moving average support at 18.15. RSI negative, MACD positive, stochastics over-bought at 100%/69%. I recommended Intel for a month on dips below 18. Merrill Lynch's Joe Osha downgraded Intel on June 13, 2002, in his CNBC interview, comparing Intel to a Japanese real estate bubble (Osha said he worked in Japan for 5 years). Summer is seasonally slow for chip-makers Intel and AMD, I have also recommended AMD at 6.99. Recently AMD hit a low of 7.69. Competitor AMD is now operating below the B/E level, but should become profitable in the 4th Quarter (Christmas).
Microsoft closed 51.80 -0.06 (-0.1%) below moving average resistance 52.50. RSI, MACD negative, stochastics rising to neutral 51%/40%. U.S. Justice Dept. does not have the time nor manpower to spend on "Mr. Softee." The 9 holdout state attorney generals will settle in similar fashion. Why? Microsoft can bring jobs to their states, thus the bottom line is Jobs. Microsoft is relying on its X-box and dot.Net initiative to restore sagging growth. If you want to make money in the Internet space buy Microsoft game supplier stocks directly.
Cisco closed 14.44 +0.06 (+0.4%) above its moving average support at 13.95. RSI, MACD positive, stochastics rose to over-bought 77%/78%. When Nasdaq made short-term bottom May 7, funds gapped Cisco to 16. Since then, it filled its chart gap from 13.50 to 15.15. Cisco is the most widely owned and most overvalued Nasdaq stock, avoid it. Suffers from myopic management and commodity business in a stagnant market. Cisco grew by steady acquisitions like Worldcom and AOL, once Cisco bought up all small networkers and had none left to buy, its stock price fell. I wrote for 2 years about excessive Price/Earnings ratio for Cisco and growth fueled only by acquisition. Just review any of my 200 articles. Like Microsoft, Cisco has $1.69 billion outstanding employee stock options not expensed.
Oracle closed 10.15 +0.47 (+4.9%) above its moving average support at 9.60. RSI, MACD positive, stochastics over-bought at 100%/78%. There is no growth in database management software business. In past year, major defections by key Oracle management LIMITS future. With year-to-date IT spending non-existent, strictly an underperformer. Government I-tech 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 surged from 7.20 in June on expectations. Great candidate for Sept. put options back below the 10.00 strike.
Dell closed 25.44 +0.41 (+1.6%) above its moving average support at 24.82. RSI neutral, MACD positive, stochastics rising at 93%/68%. This stock has been unable to break 28 for two years. Makes great short sale at 28 or higher since current Price/Earnings 33 excessive.
Sun closed 5.70 + 0.43 (+8.0%) above moving average support 5.30. RSI neutral, MACD positive, stochastics over-bought at 100%/75%. Sun makes servers for the Internet dot.com infrastructure. With Bush's team in and Clinton's agenda history, ENRON got the bucks, and Internet dot.com went broke. Government slapped Microsoft on wrists for monopoly. Sun was shafted. Texas-based Dell covets Sun's server business. Sun is profitable, but trades like a bankrupt telecom. Recommended as a strong buy at 4.99 recently (July 11).
ACCENTURE. I recommended at 12 when it was 20, ACN closed 14.45 +0.35 (+2.5%)
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