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 Aug. 17 -Trading Tips -Sitemap -Stock Picks -Subscribe

NASDAQ COMPOSITE
INDEX closed 1842.97

The Worst is Ahead of Us
Fri., Aug. 24, 2001

******************Commentary*******************
August 23 Go To Page 2 Nasdaq closed 1842.97 -17.04 on Thursday.
On the 10-day chart, Nasdaq closed below its moving average (MA) resistance at 1863. Most of the day it was much higher, peaking at the intermediate MA of 1882. There will be a major rally Friday to achieve the short-term over-sold rebound to 1905 that I have forecasted in the last two day's newsletters. Profit-takers hit the gap higher opening at 1880 Thursday, but late news on Cisco Systems will rally the Nasdaq Friday. RSI and MACD are positive, stochastics neutral at 52%/35%. The volatile trading over the past week has had twice July's intra-day trading swings. On intermediate 90-day chart, Nasdaq closed below moving average (MA) resistance at 1882. Ever since July 31, I have forecasted the Nasdaq would fall sharply to 1760 after the August 17 options expiration. Also, I forecasted the volatility would heat up and it would not be straight down. RSI, MACD are at 3-month lows, and stochastics eased to 30%/22%. The choppy pattern representative of investor camps, an old-line group which believes in Fed rate cuts, and a newer class of investors who only trade on momentum. Longer-term Nasdaq moving average resistance (MA) is at 1969. This 2-year MA is the most critical technical reading for mutual fund investors. If and when the Nasdaq decisively moves to the upside through this 1969 MA in a series of 10 consecutive extremely positive advance-decline days, will Nasdaq Bear have ended. Long-term mutual fund investors still must wait patiently for a lower risk entry level. RSI and MACD are negative, L-term stochastics stayed extremely over-sold at 14%/15%. March had lower stochastic readings but not the lowest prices, and current long-term stochastics are now at April 6 levels (an 8%/15% reading) when Nasdaq did hit the year's lowest prices. Strategists for well known brokerages told you to buy last year when Nasdaq was at 5000. Who are these gurus? You know the names Abby Joseph Cohen and Joe Battipaglia. Right here July 31, I forecasted Nasdaq's decline one day before Abby Joseph Cohen told us "the worst is behind us" on CNBC, with my target forecast of a decline to 1760 by first week of September when Nasdaq was at 2027. The financial TV media has done its best to promote and glorify Abby Joseph Cohen because these strategists work for financial TV media's heaviest advertisers. All year long they tried to correlate increases in stock prices to the reduction in Federal Reserve short interest rates. While there might have been a relationship from 1880 to 1980 in the manufacturing age, today's U.S. has become a service economy far less sensitive to Fed interest policy management. Unfortunately, no one told Greenspan.
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