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.
Nasdaq July 17 -How To Trade -Sitemap -Stock Picks -EMAIL ME

NASDAQ COMPOSITE
INDEX closed 2027.13

Will Nasdaq Ever Get a Summer Rally?
Tue., July 31, 2001

******************Commentary*******************
July 31. On the short-term 10-day Nasdaq chart, the moving average at 2040 was broken in a last hour sell-off. Interestingly, Nasdaq could not trade higher than 2056 intra-day, which tops around 25 points less than the previous intra-day peak of 2081 on July 19, when I forecasted a decline to retest the 1950 level -correctly occurring July 24-July 25. I don't forecast a sustained upward move on Nasdaq until successful tests of April's lows, possibly as low as 1760 on Nasdaq. With over 50% of newsletter writers continuing to remain bullish in the face of a global economy that is still weakening, many investors are HOLDING complacently for a "summer rally". This is a traders market, for short-term trading only. RSI on the short-term chart fell to just above the neutral 50 level. One more down day and short-term traders could take Nasdaq for another retest of 1950. Short-term MACD turned negative. Stochastic readings 20%/55% are plunging, but short-term Nasdaq is not oversold enough for more than a brief rally. Sell into TECH rallies. On intermediate basis, Nasdaq attempted to break a two-month series of lower rally peaks dating back to May 22 when Nasdaq rose to 2320. That was just before Laura Conigliaro of Goldman Sachs started her downgrades of tech favorite Sun Microsystems, a major influence on the market overall. The next 3 Nasdaq peaks were 2262, 2184, 2108, before yesterday's 2056, each representing a 3% MEAN AVERAGE DECLINE FROM EACH PREVIOUS RALLY PEAK. Who says that technical analysis and short-term traders don't rule the market? The average point decline from rally peak to rally peak has been 67 points. If Nasdaq continues its 2-month pattern, the next decline and rally will take Nasdaq back to a level 3% lower than Tuesday's peak at 2056, or Nasdaq 1992. On the intermediate chart, Nasdaq closed just above the moving average support at 2015. Any close below that level today or tommorow will lead to further deterioration. Key economic reports on employment are due at the end of the week, Nasdaq remains cautious. RSI negative at 48, MACD neutral, and intermediate stochastics very over-bought at 75%/80%. Intermediate chart forecasting big selloff. Longer term Nasdaq moving average resistance remains around 2080. The Nasdaq's inability to mount any sustained rally since the end of April is confirming U.S. technology economy is NOT IMPROVING. Don't listen to brokerages hype. Long-term RSI is negative, MACD positive reflecting support at 1950 which has held for months. Long-term Nasdaq stochastics neutral at 35%/35%. Nasdaq very hesitant, many investors are far too bullish. More downside is likely with the release of weak U.S. economic data on Friday. Traders should commit 30% of funds at Nasdaq 1950, and go long 100% at Nasdaq 1760. The U.S. unemployment rate will be 5.5% before any economic recovery.
Diversify to JAPAN ADR's or look North for CANADIAN STOCKS.
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