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 1282.65

July 23, 2002 - INDEX FUNDS killing Dow Jones

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July 23 Go To Page 1 Nasdaq Composite closed at 1282.65 on July 22 Nasdaq fell 99.97 (7.2%) since July 15, see my July 15 online posting.
On the 10-day chart, Nasdaq is 1.1% below short-term moving average resistance at 1297. Negative RSI, MACD are at lowest levels in two weeks. Short-term stochastics are neutral at 22%/49% forecasting modest moves. I wrote July 15 that violation of 1328 short-term would lead to capitulation. It did. Intermediate 90-day chart shows Nasdaq 4.5% below its intermediate moving average resistance at 1343. Downtrend is clearly evident. July 15, said a pullback with lower close in the middle of last week would confirm renewed selling. It did. In September 2001, NYSE CEO Dick Grasso forced the closing of all U.S. stock exchanges with approval of Treasury Sec. Paul O'Neill. That Sept. 11-17 closing wiped great value out of Nasdaq even though Nasdaq facilities nationwide were unaffected by 9/11 local power outages at the NYSE. Many small trade margin accounts were forced out of the game on Sept. 17, 2001, and never came back. That leaves only INDEX FUNDS to move markets. Intermediate RSI, MACD negative, stochastics very oversold at 5%/17%. Nasdaq rarely gets more than 4.0% away from its 90-day moving average like it is this week. Long-term Nasdaq is 8.4% below moving average resistance at 1400. That level must be crossed to confirm change in the downward trend. RSI, MACD negative, 2-year stochastics falling to 4%/8% and equalling their lowest levels prior to good rallies in mid-May and mid-June.
Intel closed 18.26 -0.39 (-2.1%) below moving average resistance at 18.50. RSI negative, MACD positive, stochastics plunged to 4%/37%. I have 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. closed 8.42
Microsoft closed 46.31 -3.25 (-6.6%) below its moving average resistance at 50.00. RSI, MACD negative, stochastics falling to 2%/21%. U.S. Justice Dept. does not have the time nor the manpower to try "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 rate. Judging by sagging price of market leader SONY (PlayStation) stay away from Microsoft. If you want to make money in the Internet space, buy Microsoft game supplier stocks directly.
Cisco closed 12.98 -0.67 (-4.9%) below moving average resistance at 13.80. RSI, MACD negative, stochastics falling to over-sold 9%/21%. When Nasdaq made a 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 excessive Price/Earnings ratio and growth by acquisition. Cisco has $1.69 billion in employee stock options not expensed.
Oracle closed 9.23 -0.49 (-5.0%) below its moving average resistance at 9.70. RSI, MACD negative, stochastics falling to 1%/25%. There is no growth in core database management software business. In past year, major defections by key Oracle management LIMIT 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 to over 10.50 last week on expectations. Great candidate for Sept. put options back below the 10.00 strike and subscribers got the Sep.10 put at 1/2 last week (now 1.50).
Dell closed 23.77 -1.31 (-5.2%) below its moving average resistance at 25.10. RSI neutral, MACD positive, stochastics falling to 6%/33%. This stock has been unable to break 28 for two years. Makes a great short sale at 28 since the current Price/Earnings 32 is excessive.
Sun closed 4.06 -0.19 (-4.5%) below its moving average resistance at 4.92. RSI, MACD negative, stochastics over-sold at 0%/21%. 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 still profitable.
ACCENTURE. I recommended ACN at 9 when it was 20, ACN closed 14.85 unchanged.
How to Use Site. Scandals Andersen, KPMG Best Nasdaq Big-Caps
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