PUBLISHED DAILY - STOCK MARKET DIRECTION - © July 2003
STOCK MARKET DIRECTION by Steve Zito Financial Newsletter
Technical Indicator Analysis of the Nasdaq Composite Index
Individual analysis of the twenty largest technology stocks.
Redistribution only with permission of the writer Steve Zito.
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STOCK MARKET DIRECTION by Steve Zito Email Newsletter for Wednesday, July 30, 2003
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In this issue, new BUYS on NXTL Sept 20 calls, place stops on PCLN, TM, raise on AMTD.
Are discount airlines a buy? What happens when Saddam is killed? Terror alert and PCLN.
Citigroup (C) close to my buy at 43, but only for those who can stomach its management.
Metromedia Fiber Network (MFNX) bankruptcy hearing date set for August 21 in New York.

Information in this letter is based on closing prices from Tuesday, July 29, 2003
Dow Jones Industrial Average
----------------------------------------- 9,204.46 -62.05 (-0.67%)
Nasdaq Composite Index
----------------------------------------- 1,731.37 - 3.99 (-0.23%)
Standard and Poors 500 Index
------------------------------------------- 989.28 - 7.24 (-0.73%)
10-Year Note yield
-------------------------------------------- 4.398% +0.114

DOW JONES INDUSTRIAL AVERAGE analysis
Dow Jones Industrials closed 9,204.46 -62.05 at 0.05% above Dow's 7-day moving average.
The TV media labeled Tuesday, "a drop on unexpectedly weak Michigan Consumer Confidence
and a snapback rally on word Saddam had been surrounded." Neither explanation has merit.
First of all Tuesday's report on sentiment was the Conference Board Consumer Confidence.
Announcers at CNBC and CNN don't know the difference from the Michigan report (Aug. 1).
Conference Board Consumer Confidence has been weak, Michigan Sentiment has been steady.
Stocks likely do not trade for reasons ascribed by high school graduate TV announcers.
I have written for weeks since July options expiration that "up one day, down the next"
is more likely than a breakout to Dow 10,000 or a selloff against an improving economy.

Conference Board Consumer Confidence surveys AVERAGE person's expectation of the future.
It does not target stockholders. It does not ask Walmart shoppers. It targets consumers.
I am a consumer, but I never shop Walmart. I am a consumer, but all my stocks have now
filed for bankruptcy, since I invested in Citigroup Salomon's telecom recommendations.
All my stocks were bought low, down 90% from peaks in 2000 but unknown to me, Worldcom,
Metromedia Fiber Network, Global Crossing, Winstar, Exodus, all were management frauds.

Citigroup and JP Morgan just settled with the NY Attorney General and the SEC on Enron,
another fraud, for a slap on the wrist and promise of We won't do it again, forgive us.
That won't get my stocks back. So it is no wonder Tuesday's Consumer Confidence was down
while the stock market is up. Only top pigs at Wall Street firms are 100% in the market.

The rest of us can barely hold up our pants to pay our bills, just look at Kobe Bryant.
Kobe let his pants down for what, 15 minutes, and may lose $100 million in endorsements.
Nike decided to join McDonalds (earnings were lower Tuesday), Coca-Cola, and Spalding to
wait until a jury decides if Kobe asked for permission before taking his shot in Eagle.
Don't blame Kobe. Bryant never asked any opponent's permission to take his best shots.

Nike is well aware of another recent NBA star who was accused, then acquitted, and sued
his contractual endorser for dumping him for millions which he won under contract terms.

But Kobe, just like most of us, when our stock was high, was hurt by staying too long.
If we all knew the exact moment to pull out, of stocks that is, no one would lose money.
Recent Dow breakouts MMM and MER fell on Tuesday, profit taking was long overdue there.
The hot money went elsewhere away from cyclicals, some say into discount airline stocks.

What about discount airline stocks? Online travel sites Expedia, Travelocity, Priceline
say business is much higher than before the Iraq war. Officially, Bush declared the Iraq
war over from the deck of an aircraft carrier on May 1. No one told the Iraqis, however.
No matter to Bush, Iraqis don't vote in the U.S. elections. Homeland Security finally
skipped July 4 for raising terror alert status from yellow to paranoid, it took 2 years.
It has been two years since the last terror incident, and the color system doesn't work.

The most profitable airline is low fare leader, Southwest, which has never shown a loss.
Southwest (LUV) is from Texas, a big place, and successfully holds 10% share nationwide.
Despite a high stock and increasing earnings year after year, the Bush administration
gave Southwest $271 million in FREE government aid in the second quarter as Southwest
was delivering a 141% increase in net profit on a 3% increase in sales, according to
Southwest CFO Gary Kelly appearing on Bloomberg. This aid compares to last year when
United Airlines, based in Democratic stronghold Chicago, IL asked Bush's government for
a paltry $1 billion in loan guarantees, received nothing, and promptly filed bankruptcy.
UAL stock went to 0. Chicago led the U.S. jobs lost in 2002 with 59,000 put out of work.

Airlines should be avoided except those based in Texas: Southwest, Continental, American.
In fact, American Airlines stock had risen from $1 to $10 since February. A Texas leader.

What does Mr. Bush do about job losses in 2001-03 which led to low Consumer Confidence?
This week, he sent Labor Sec. Elaine Chao on a 500-mile bus ride through Wisconsin and
Minnesota to show the people of the north they are deep in his heart as much as Texans.
Elaine Chao was only too happy to get out of Washington before the Friday jobless report.
Chao probably spends more on her hairstyle than most people get in weekly jobless checks.
Hardworking men and women drivers (mother truckers) are calling Bush something like that.
One out of every ten high tech jobs in America will be moved to India and Russia by 2005.
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030729/tc_nm/tech_jobs_dc_1

The CNBC braintrust, Kudlow and Cramer, would have CNBC viewers believe that Dow 10,000
is coming soon to a TV screen near you. They said Saddam will be caught (not killed) so
obviously Cramer has not done his homework. Saddam's sons were not "caught" - no effort
was made to take them alive. The real question is, if Saddam is so stupid as Kudlow and
Cramer say he is, how has he eluded 155,000 heavily armed "peacekeepers" tracking him?
They're after Saddam for hiding weapons of mass destruction, but who is hiding Saddam?
Tell me, and I promise to share the $25 million bounty on his head with you when paid.

Bangladesh is hiding all copies of this week's Newsweek with Saddam's face on covers.
Banned in Bangladesh, Newsweek subscribers are wondering what's next? No more issues?
http://story.news.yahoo.com/news?tmpl=story&u=/afp/20030729/wl_sthasia_afp/bangladesh_us_media_030729065501

Around the world, there has been another secret search underway giving inspectors fits:
Loch Ness monster does not exist, no justification for invading Loch Ness, acc. to BBC,
http://story.news.yahoo.com/news?tmpl=story&cid=514&e=8&u=/ap/20030729/ap_on_fe_st/britain_no_nessie_1
To keep up on a lake-by-lake search in Scotland looking for dinosaurs of mass deception,
http://news.bbc.co.uk

On CNBC Kudlow claimed Tuesday stocks are rising because they cannot ignore prosperity.
If America is so prosperous, why is Kudlow wearing suits that went out of style in 1980,
and Jim Cramer looks like a boardwalk carnival sideshow operator? Get a hairweave, guy.

Technically, the Dow is stuck with 9300 as ceiling. Bloomberg's Monday technical analyst
said if RSI was to jump and make a new high (versus June) as the Dow closes above 9300,
then his bearishness is wrong. At least he is not dumb enough to call 10,000 like Cramer.
Don't forget, if you know where is Saddam you can get $25 million and witness protection.
The U.S. will pay for you to relocate, likely to Virginia, change your name, get a job.
In America, if you do not know where is Saddam, you will earn peanuts like everyone else.

Dow stochastics are falling at 45%/77%. Expect more profit-taking until Saddam is killed.
When they get Saddam, expect video to appear like the end of the movie, Bonnie and Clyde.
Saddam in his safe house yelling, "come in and get me, G-man" as they fire 1,000 bullets.
Have you noticed that the two movies about 1991 Desert Storm were dismal boxoffice duds?
Not even Denzel Washington, Meg Ryan, George Clooney, and Mark Wahlberg could save them.

Gold and Silver Index XAU
XAU closed 81.44 -1.62 (-1.95%) at 0.5% above uptrend. Stochastics falling to 40%/78%.
Gold eased back to $363, but when they kill Saddam, expect a sharply down correction.
Why could gold stocks take a tumble? The U.S. Bond market rally from 3 years is over.

Friday readers bought the XAU August 75 put by placing their Bid low at 0.25 for XAUTO.
Friday's low was on a close at 0.20, when it traded 75 contracts, total volume was 302.
XAUTO Monday at 0.30 +0.10 last Bid 0.20 last Ask 0.30, volume 201, open interest 1437.
XAUTO Tuesday at 0.30 unchanged Bid 0.30 last Ask 0.35, volume 285, open interest 1468.

If the bond market continues to spike (10-year yields from 3.1% to 4.4% in 6 weeks) the
gold stocks will collapse, and gold stock float is much smaller than the broad market.
The odds of this scenario playing out are enhanced by the imminent prospect of Saddam.
A plunge by overvalued gold stocks to XAU 70 will take the XAU Aug. 75 put over 5.00.
On the other hand, North Korea could lob one into Seoul and then gold would go to $500.
When or if the XAU plummets to 70, I will then recommend to buy XAU December 100 calls.

NASDAQ COMPOSITE INDEX analysis
Nasdaq Composite closed 1,731.37 -3.99 at 0.5% above trend. Stochastics high 78%/82%.
Nasdaq is anticipating the death of Saddam, as if that will cause a U.S. economic boom.
How this boom will occur with 10% of technology jobs leaving the U.S. for India, Russia
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030729/tc_nm/tech_jobs_dc_1
is hard to figure. Mr. Bush should be proud to have outdone his dad in losing U.S. jobs.

At least he is good at something. Is the world any safer under Bush? Buy security stocks
and companies that work on bio-vaccines, as well as airport screening devices. Buy them.
Forget the ACLU objections to full-body X-ray scanning devices in airports later in 2004.
When Xray devices are installed, bleeding heart liberals (who Republicans say don't look
for work to get off welfare) will be first in line to apply for airport screening jobs.

Not only that, full body X-ray scanners will have built-in video recording, and the U.S.
may be able to generate some secondary income by renting out hot videos (adult section).
Except when the Saudi princes fly to visit Bush. They flew out on Sept. 12, 2001, and
apparently are exempt from airport screening. They do have $17 trillion invested here.
If you wonder what would happen if Saudis pulled out of the bond market, rent Rollover.
I know it starred Jane Fonda (Republicans called her "Hanoi Jane") but in that movie,
gold goes to $9000 overnight when the Saudis pull their money out of U.S. bond markets.

Individual stocks held by subscribers (or subscribers wished they had bought them):

Online Travel Sales
PRICELINE gained 32% in three trading days, subscribers bought it last week at 24.50.
Subscribers bought Priceline.com PCLN last Thursday at 24.50 just in time for Tom Ridge
at Homeland Security Dept to begin airing TV commercials to replace terror alert colors.
Also Priceline beat the street on earnings and gained 6.16 on Friday, another 9% Monday.
Subscribers bought PCLN at 2.05 in March and April, sold it at 4.01, Priceline split in
reverse one share for every six old ones at 4, revalued to 24. New buyers just made 32%.

PCLN closed 32.23 -2.53 (-7.28%) at 9.4% over a viagra uptrend, stochastics at 77%/85%.
I wrote yesterday to expect profit taking. A viagra uptrend is one that is straight up.
http://biz.yahoo.com/rc/030724/leisure_priceline_earns_3.html Expect more profit taking.
No sooner had Tom Ridge altered strategy than U.S. started the same old ambiguous alert.
This time, CNN quoted unnamed government officials saying airline attacks end of summer.

New: Subscribers should place a Stop Loss order on PCLN at 29, on new terror warnings.

NXTL, WHC, TM Three new stock picks added to my recommended list on Monday's open:

Wireless Communications
Nextel Communications, NXTL was bought on the open Monday (7/28) by readers at 19.20.
Nextel weathered the issuance of $1 billion in junk bonds a week ago at 7.4% (vs 6.5%)
http://biz.yahoo.com/rf/030724/financial_junk_issuance_1.html
Big gains in wireless (including AWE, PCS) are expected in second half of this year,
http://biz.yahoo.com/rc/030725/telecoms_wireless_2.html
NXTL closed 18.70 +0.01 (+0.05%) at 1.2% below trend, stochastics rising to 30%/29%.

New: buy NXTL Sept 20 calls at 0.75, FQCID last 0.80 Bid 0.85 Ask 0.95 v 362 oi 1467.

Security
Wackenhut Corrections, WHC was bought on the open Monday (7/28) by readers at 17.00.
Contracted to lock up misbehavers, http://biz.yahoo.com/prnews/030714/flm015_1.html
Wackenhut announced an SEC filing Tuesday after the close, completing debt for equity.
http://biz.yahoo.com/e/030729/whc8-k.html
WHC closed 17.05 -0.18 (-1.04%) at 0.05% below trend, stochastics falling to 30%/46%.

Japanese Stocks traded on NYSE
Toyota Motor ADR, TM bought on the open Monday by readers at 52.50 (was there 8 days).
Toyota report last month sales +6.7%, http://biz.yahoo.com/djus/030728/0048000028_3.html
Honda reported lower Q1 sales but raised guidance for next 3 quarters, based on better
sales overseas in global markets, not in Japan. Honda had suffered more than Toyota had.
http://biz.yahoo.com/djus/030729/0550000852_2.html
TM closed 51.25 -1.13 (-2.16%) at 1.9% below downtrend, stochastics falling to 12%/40%.

New: With the Japanese market down 2% Wednesday (7/30), Stop Losses on Toyota at 47.50.

Online brokerages
Ameritrade AMTD, keep holding the third largest and only pure play U.S. online broker.
AMTD closed at 9.78 -0.20 (-2.00%) Readers bought it at 7.80, raise Stop Loss to 9.20.
Ameritrade closed at 2.4% over uptrend, stochastics falling from overbought to 45%/76%.

Nanotechnology
Nanogen NGEN, keep holding, bought at 2.50. NGEN closed 3.55 -0.04 (-1.14%). Stop 3.05.

Biotechnology
Oxigene OXGN, note the plus 50% gain on Monday. Then OXGN Tuesday 10.50 -1.85 (-14.98%).

Elan ELN was stopped out last week at 4.80 (subscribers had rebought at 4.75). Stay out.
ELN closed at 4.05 -0.48 (-10.60%). The SEC is not done with Biotech CEO's, so wait.

Semiconductors, Video Graphics Chipmakers
Nvidia NVDA, watch as it has completely broken down from 28+ since the government was
rumored to have begun investigating the entire home video game industry. Stopped at 23.
Nvidia is a top customer of Taiwan Semiconductor (Hsinchu) and from Taipei comes news
that higher costs from TSMC passed along to NVDA caused a drop in 2nd quarter profits.
http://biz.yahoo.com/djus/030729/0551000855_2.html
NVDA closed at 19.07 -1.34 (-6.57%) Morgan Stanley slashed earnings estimates by 29%.
http://biz.yahoo.com/rc/030729/tech_nvidia_research1_1.html

Financials
Citigroup is a buy at 43, if you don't object to holding stocks of greatest offenders.
C closed 45.44 -0.36 (-0.79%). Recommended last week to buy C at 43 after SEC settled
with C and JP Morgan for pennies on the dollar with regard to fraudulent ENRON loans.

Now Citigroup is settling with banking regulators on an agreement never to cheat again.
This settlement with Congress and bank regulators has validity of Mike Tyson promises
never to bite an ear of anyone getting too close to him. Citigroup is so well connected,
when an angry viewer of Lou Dobbs Tonight (formerly CNN Moneyline) had his message onair
read by Lou Tuesday night which said, "Why don't the SEC give Citigroup top management
20 years like other criminals?" Lou Dobbs replied, "they don't have authority to do it."

Lou Dobbs is protecting a friend, Citigroup CEO Sandy Weill, who will never share a cell
with former Imclone CEO, Sam Waxsal. If he did, I wonder who would steal the top bunk?

Today I received the notice from bankruptcy court setting the date for Metromedia Fiber,
for August 21. MFNX was Citigroup Salomon Smith Barney top telecom analyst Jack Grubman,
Sandy Weill's most highly compensated employee, pick in 1999 with a target price of 28.

MFNX went straight from 20 in January of 2001 to one dollar by time Sept. 11 happened.
By March of 2002, Verizon, MFNX's largest creditor, reneged on $80 million owed MFNX by
contract, and MFNX failed to meet its payroll, then declared bankruptcy in May of 2002.

For his part, Jack Grubman made $100 million in IPO fees from Citigroup from 1996-2001
and settled out of court with NY Attorney General (representing SEC) for $15 million.
At one point, Citigroup had paid $1 million to put Grubman's kids in a private school.

Sandy Weill has been compensated over $1.3 billion which analysts figured is 2000 times
the average compensation of Citigroup employees. Sandy never paid a dime to settle, but
had Citigroup settle for $400 million with NYAG (SEC) likely to be expensed in earnings.

Sandy Weill was the CEO of Travelers Insurance when he merged it with Citibank, and then
he later ousted CEO John Reed. Like any good insurance man, Sandy sold it but never paid.
Let's hope Sandy's cholesterol from power lunches is higher than his integrity quotient.
I am going to focus on C stock for options and timing, to get back every penny I lost on
fraudulent IPO's touted by Jack Grubman for the benefit of Citigroup's CEO Sandy Weill.
Don't forget, Sandy Weill owns so much Citigroup stock that the Bush dividend tax cut
will increase Sandy Weill's income by more than $30 million this year. Trickle it down.

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