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.
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NASDAQ COMPOSITE
INDEX closed 1963.32

Will Nasdaq Ever Get any Rally?
Fri., Aug. 10, 2001

******************Commentary*******************
August 9. Back to Page Two Intel closed at 29.65 +0.04, below MA resistance at 30.15. RSI and MACD are neutral. Stochastics stabilized but are over-sold at 25%/30%. Intel has been in a trading range between $26 and $32 for 8 months. Intel has great new products, but is dependent on a mature PC industry. PC sales are going to show a decline this year for the first time. Pundits are touting Windows XP as the beginning of a huge new technology cycle in PC's. More likely Windows XP is just more of the same old bundled interface. Intel stock is in the middle of its trading range, and it held $29 Thursday, which shows relative strength versus large Nasdaq favorites. NYSE competitor National Semiconductor (NSM) has risen from $27 to $33 in the past 3 weeks, a 22% move which I caught (posted on my Bulletin Board). NSM has a franchise to put microprocessors in computerized kiosks on every street corner in Japan.
Microsoft closed at 65.01 +0.15 below the MA resistance at 65.85. RSI and MACD remain negative, but stochastics turned up from over-sold at 30%/25%. Financial media reporting on MSFT is trite and illusory. For example, CNBC's Maria Bartiromo reported Thursday that Microsoft would not get its Windows XP product released until Oct. 25, which would not be in time for the back to school season. Maria Bartiromo apparently is not aware that on June 20, Microsoft announced a campaign to have computers now being sold by Dell, Compaq, IBM, and Hewlett Packard to be "Windows XP ready," in other words, ready to upgrade to XP. So why would anyone postpone a purchase just to wait for XP?
Cisco closed at 18.29 +0.31, below the MA resistance level of 18.75. RSI and MACD are negative, and stochastics are turning up from extremely over-sold at 25%/20%. Earnings report Tuesday night was the catalyst for Cisco Systems to crash through its short-term uptrend line, but it became so over-sold Thursday morning that short-term traders should be able to make $1.50/share buying at $17.80, the price I mentioned yesterday at which Cisco would turn around, and it did. Investors do not like uncertainty about Cisco's lack of earnings, but this stock was very over-sold Thursday morning. Long-term, Cisco is headed for $10. Often I wrote last year when Cisco was $80 that Cisco's growth was made by acquiring rivals and a pool of potential candidates for acquisition would eventually dry up.
Oracle closed at 15.99 -0.31, below MA resistance at 17.35. RSI and MACD remained very negative, stochastics are still very over-sold at 4%/8%. Oracle still has major support at $14, for traders looking to make $3/share on an over-sold bounce back to $17. Oracle is doing a great job of finally filling a chart gap at $15.50 to $16.50 left from June 19, a move down which I have forecasted for two months. Oracle November 15 call options are a terrific play if Oracle trades below the $15 strike price soon.
Worldcom closed at 13.24 -0.60 below MA resistance at 13.80. RSI is negative at 45, MACD is positive. Stochastics remained extremely over-sold at 5%/15%. Worldcom is the best value of the Nasdaq leaders, profitable, with steady cash flow, and should rise to $20 by mid-September, when mutual funds start looking around for value plays as they bail out of other Nasdaq stocks like Cisco. Worldcom has a current P/E of 17 versus the industry P/E of 27 and the S&P 500 P/E of 23. Since Worldcom is so over-sold, and now trading below the bottom of a $14 to $20 trading range, it is a great play for short-term call options.
Dell closed at 26.64 -unchanged below MA support at 27.30. RSI and MACD turned negative, stochastics are slightly over-sold at 22%/38%. CS First Boston forecasted a 6% decline in industry PC sales. As a PC manufacturer, Dell is one of the most over-valued tech stocks, and must trade down to $21 to achieve a reasonable Price/Earnings ratio compared to rivals. Gateway (GTW) is giving up on European and Asian Operations which is further evidence that declining economies outside the U.S. are seriously eroding sales of PC's.
Sun Microsystems closed at 16.76 -0.49 below MA resistance at 16.85. RSI has fallen to neutral 50, MACD is still positive, and stochastics are now over-sold at 25%/50%. Sun Microsystems was on a "break-out" from a low of $13.50 on July 11. That break-out may have ended. *Go to Page Two *Back to Page One *Sitemap *Stock Picks
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