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 1930.32

Why Brokerages are Trashing Nasdaq
Fri., Aug. 17, 2001

******************Commentary*******************
August 16. Go To Page 3 Relative Strength on Nasdaq's short-term chart remained below a neutral 50. MACD on the short-term chart remained negative. Stochastic readings again fell to over-sold and then recovered to close at 68%/66% just like in the previous 2 days. Thursday, the market tanked right on the open, there were no buyers. This vicious pattern will be repeated often in the next two weeks. The strategist side of brokerage firms says "buy" voiced by a parade of pundits from Abby Joseph Cohen to Tom Galvin (CS First Boston) which resembles a dog and pony show. While many retired folks are switching to peanut butter sandwiches instead of frequent restaurant meals, Abby and her cronies are still living the good life as if Nasdaq never left 5000. Your mutual fund managers further complicate timing issues by telling us "stock selection" is important at this time. Was stock selection not important at Nasdaq 5000? Retirement portfolios are down 60% to 80% in a year, so how can people "just relax" as Charles Schwab intones in his TV ads? On the intermediate chart, Nasdaq closed below moving average (MA) resistance at 1950. On July 31, I forecasted that Nasdaq would fall sharply to 1950, then rebound to the 1992 level, and then begin major selling down to 1760 after options expiration. So far, Nasdaq went down, back up to 1998, and then below 1900. Volume is increasing on the down days. RSI, MACD are still negative and intermediate stochastics plunged and rebounded to 40%/18%. The trading on Friday will be volatile due to stock and stock index options expiration. Long-term Nasdaq moving average resistance is at 2038. This barrier is more important than any other technical factor. Only when Nasdaq explodes again through this level and registers ten up days in a row will the Bear Market be over. I have advised 70% funds in cash reserves waiting for Nasdaq 1760. With that, risk of loss will be minimized if Nasdaq does fail miserably. Long-term Nasdaq RSI still negative, MACD is neutral, stochastics negative and falling at 10%/25%. For low-risk entry into risky stocks, long-term stochastics must be lower, like an 8%/15% reading I noted on April 8. Nasdaq has collapsed for the simple reason that Former Treasury Sec. Robert Rubin and his Wall Street CEO cronies sucked foreign investment capital into Nasdaq for 8 straight years pushing a global economy into investment recession. A U.S. high-tech complex has no one to sell to but each other. I doubt if Microsoft needs to buy Oracle database software or if Intel needs to buy Sun SparcStations. The U.S. Treasury under Robert Rubin created Nasdaqs stock bubble financed by foreign capital and they left foreign customers without money to buy U.S. high-tech products. Greenspan can lower interest rates, but Cisco will still have no customers to sell to outside the U.S.
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