Steve Zito, Wharton School BS Econ, MS Fin, 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 1259.55

Aug. 6, 2002. Who is Selling, Who is Buying?

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Aug. 6. Go To Page 1 Nasdaq Composite closed at 1259.55 on Aug. 6. Nasdaq fell 2.57 (0.2%) since July 26, see my July 27 online posting.
On the 10-day chart, Nasdaq is 0.0% above moving average support at 1259. RSI, MACD now positive, after breaking a steep 4-day freefall (Nasdaq down 10.2%). Tuesday, Nasdaq gapped open, became over-bought, rolled over in last hour. Short-term stochastics plunged to 21%/69% after approaching 100% all day. I wrote July 15 violation of 1328 short-term would lead to capitulation. It did. Expect near-term support at Nasdaq 1240, average lower end of the last 10 days. Intermediate 90-day chart shows Nasdaq 0.7% below intermediate moving average resistance at 1268. July 15 I said a pullback with lower close in the middle of week before would confirm renewed selling. It did. Large hedge funds, foreign banks and insurance companies are selling. INDEX FUNDS are buying, expecting the FED to lower interest rates. Intermediate RSI, MACD negative since May 28, when this 54-day 24% drop started, stochastics fell from over-sold on Monday to close at 40%/20%. There has been nice mid-month rally for 1 week every month due to expiring options. These mid-month rallies in April and May averaged 7.8% gains. Same 8.3% gain from June 14 low 1445 to June 18 high 1566. These short rallies solely related to expiring stock and index options arbitrage. Long-term Nasdaq moving average resistance is 1340. Nasdaq's two-year moving average is at the lowest levels in Nasdaq's 24-month Bear Market. Morgan Stanley's chief economist is very negative, and calling for a double-dip. Aug. 6, Goldman, Deutsche Bank, Lehman called for immediate Fed interest rate cuts. The August 14 SEC deadline, corporate CEO financial statement verifications is approaching, only 46 out of 947 companies have certified financial results. RSI, MACD negative, weak stochastics not very encouraging at 25%/24%.
Intel closed 17.13 +1.25 (+7.9%) below moving average resistance at 17.30. RSI negative, MACD positive, stochastics recovered to neutral at 40%/19%. I have recommended Intel for 2 months on dips below 18. Friday, Intel closed under 17 for 3rd time in 30 trading days, always rebounding. Merrill Lynch's Joe Osha downgraded Intel on June 13, 2002, in his CNBC interview, comparing Intel to a Japanese real estate bubble. Intel is not in the real estate business. Summer is seasonally slow for chip-makers Intel and AMD, I have also recommended AMD at 6.99. Friday, AMD hit a low of 7.01. Competitor AMD is now operating below the B/E level, but should become profitable in the 4th Quarter. AMD Call recommendation, AMDAB Jan 10 (Chicago) Bid 0.75, bought Friday, doubled Tuesday 10 times normal volume. AMD closed 8.32 +0.75.Microsoft closed 45.67 +1.68 (+3.8%) below its moving average resistance at 45.70. RSI, MACD negative, stochastics rebounding from over-sold to 39%/20%. Microsoft relies on X-box, dot.Net initiative to save sagging growth. So far, it just is not happening. Gates has no legal monopoly on Internet games. If you want to make money in Internet games, buy the game suppliers X-box vendors directly.
Cisco closed 12.07 +0.71 (+6.3%) below moving average resistance at 12.22. RSI, MACD negative, stochastics rebounding from very over-sold to 41%/22%. Cisco has $1.69 billion unexpensed outstanding stock options. Ridiculous CNBC Jim Cramer pimped to viewers in January over 20 level. Cisco is the most widely owned and most overvalued stock on Nasdaq. Suffers from myopic management and a commodity business in a stagnant market.
Oracle closed 9.33 +0.32 (+3.6%) below moving average resistance at 9.41. RSI, MACD negative, stochastics rebounding from very over-sold to 26%/21%. Oracle, like Microsoft, has peaked in its long-term product development cycle. There is no growth in its database management software business, bulk of sales. Major defections by key Oracle management limited its future. With IT spending growth non-existent, strictly an underperformer. Oracle surged from 7.20 in June to over 10.50 as Larry Ellison is a rare CEO to certify financials.
Dell closed 24.32 +1.21 (+5.2%) above its moving average support at 24.02. RSI, MACD negative, rebounding from over-sold to 68%/33%. Dell on verge of competing with Palm. Should have small wireless handheld devices available by Christmas this year. Dell failed miserably in the Internet device market last year, pulling out after 2 months. Dell is good at one thing, making latest PC's marketed to kids and companies. Watch the reaction in Palm.
Sun closed 3.78 +0.25 (+7.1%) below its moving average resistance at 3.81. RSI, MACD negative, stochastics rebounding from very over-sold to 42%/21%. Sun hit my target price of 4.99, rallied to over 6.00 in a week, then was downgraded by 4 brokerages July 19, and subscribers were stopped at 4.72. Lowered a new target price to 3.49 on July 20.
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