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STOCK MARKET DIRECTION by Steve Zito Newsletter on Market Direction
Technical Indicator Analyses of the Dow and Nasdaq Composite Index
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STOCK MARKET DIRECTION by Steve Zito Newsletter for Friday, Sept. 3, 2004

The U.S. stock market rose Thursday pre-Bush's convention speech, Buy AMD.
AMD 11.67 -0.03 (-0.26%) and readers should buy Jan 10 calls at AMD 10.80.
Stock Market Direction has been ranked number one for four years since 2000.

Information in this newsletter based on prices from Thursday, Sept. 2, 2004
Dow Jones Industrial Average
---------------------------------------- 10,290.28 +121.82 (+1.20%)
Nasdaq Composite Index
----------------------------------------- 1,873.43 + 23.02 (+1.24%)
Standard and Poors 500 Index
----------------------------------------- 1,118.31 + 12.40 (+1.12%)
10-Year Treasury Note yield
-------------------------------------------- 4.194% + 0.071

DOW JONES INDUSTRIAL AVERAGE analysis:
Dow Jones Industrial Average closed 10,290.28 +121.82 at 1.15% above a 7-day
moving average which had appeared to have peaked at same level of a Dow rally
from July 27 to August 4. After holding the 10,000 level in a selloff Tuesday,
the Dow has gained 1.65% since Monday's close, all while hearing Rudy Guiliani,
Dick Cheney, Arnold Schwarzenegger, John McCain and Zell Miller tell New York
delegates (about 4900 of them) why only George W. Bush answers to God's call.

The novice will look at the Dow's upward climb for the last three days as proof
investors like Bush tax cuts, the wars defending freedom, no child left behind,
and God sharing quality time with straight couples in America. Fore more years,
not the 365-day type, but more "fores" on the golf course while half of the U.S.
goes hungry. The 2 overfed Bush twin daughters don't have to worry about eating.

By the time Bush girls' high cholesterol catches up with them 40 years from now,
there won't be any clean air left in the U.S. as Texas has taken the lead in SUV
sales with the highest average monthly car payments for residents of U.S. states.
The average car payment in Texas is $100 more there, averaging over $500 a month.
Vice President Cheney chided the Democrats for hurting Hummer sales in his speech.

General Motors and Ford are not so sanguine about SUV sales, which dropped 37%
in August, as the price of gasoline rose to an average $1.86 in America. That is
about 7% of total expenditures for low income families who drive, only a swatting
of flies for U.S. millionaires whom Bush represents. In fact, millionaires, only
1% U.S., get back more cash from REIT's and oil company limited partnerships than
they lose in gassing up the kid's Hummer, or their $3 million Cadillac limousines.

$3MIL is how much the Bush Presidential limo costs to mount guns over every wheel
and bulletproof entire surfaces (as well as sport a direct wireless communication
system in the back seat with a hotline to God). Bush ended his speech on Thursday
by claiming he "reaches out for higher powers beyond the stars directing freedom."
Obviously, Bush has never heard age old truism, there is no free lunch in America.

Not content to let Americans practice religion any way they want, voter turnout
teams for the Bush re-election are signing up door-to-door prospects to be newly
baptized into the Baptist religion, and they are signing up newcomers in droves.

Guess it's a case of nothing to lose. If you have no money, no job, and no hope,
why not try God when a down and out person has tried everywhere else. The Red Sox
fans waiting for a World Series champ since 1918 are especially vulnerable to God.
Baptists were in New England on Wednesday and Thursday on a 25 day, 50 state trek
that started in Florida to baptize 1 million people this year in the United States.
http://story.news.yahoo.com/news?tmpl=story&cid=519&ncid=519&e=11&u=/ap/20040902/ap_on_re_us/baptist_barnstorming_4

Religion plays a part in all life endeavors, at least de Lima of Brazil who lost
his 1st place Gold Medal in the Olympic marathon will attest. De Lima was pulled
off the course by a 57-year old lunatic priest from Ireland who lives in London -
with only 3 miles left out of the 26. De Lima was winning the race but took third.
The Irish priest was sentenced to only a $3600 fine by a Greek court, despite his
innocent plea based on the priest's contention de Lima is the 2nd coming of Christ.
When the Irish priest was asked why he invaded the race course to attack runners,
the priest replied he answers to a higher authority and he was preserving freedom.
http://news.yahoo.com/news?tmpl=story&u=/afp/20040902/od_afp/britain_justice_oly_2004_gbr_bra_marathon_040902150845

Employment data for August will be released at 8:30 AM on Friday 9/3 and will move
stock markets, most likely down. Not only have weekly jobless claims soared from
Hurricane Charley in Florida, a new hurricane with 165 mile-an-hour winds is about
to smash eastern Florida and a million have already evacuated. Floridians who are
staying put their trust in the hands of a higher authority, Florida Gov. Jeb Bush.
Insurance companies are ready after receiving $15 billion in insurance claims from
Hurricane Charley damage, since Hurricane Frances ought to do double destruction.
It's bigger, more intense, and hitting a much more populated Miami to Palm Beach.

On top of ignoring Hurricane Frances coming into Florida, the Dow also ignored
Intel which reduced revenue and profit guidance after markets closed, and Intel
INTC promptly fell from 21.63 to 19.99 -1.64 (-7.58%). My subscribers sold short
Intel on January 9 at 34.50 when Jim Cramer was recommending to buy it on CNBC.
Ashok Kumar (former analyst, now managing director) appeared on CNBC to predict
that Intel will trade in a range from "high teens to the mid-20's" i.e. sell it.

Intel in the Dow, should send the Dow futures sharply lower before the jobs data.
Taiwan already sold off hard, since Intel is Taiwan's largest customer for wafers
and motherboards. When Intel sneezes, Taiwan catches pneumonia (even, maybe SARS).
http://biz.yahoo.com/ap/040903/taiwan_markets_1.html

Dow stochastics rose to very overbought 90%/77% on Thursday, predicting a selloff.
Since most of Dow's surprise rise this week occurred in Thursday's last two hours,
that gain looks like a short-covering rally just before G.W. Bush speech Thursday.
I have written, as soon as Bush or Kerry surges in the polls, stocks will firm up.
But note, the year after an election, U.S. stocks historically have had bad years.

What goes up must come down according to the law of gravity, as 20 dead Afghans
from a stray U.S. smart bomb can attest, if they were not strewn into body parts.
Hey, a 20-year-old kid who pushed a button to launch that bomb made "high score."
He will likely get a job at a software gamemaker and develop America's top seller
named "Turban Trasher" or "Marine Masher" where all the good guys vote Republican.
And like the Southern Baptists mentioned above, only two things are held important,
authority to a Christian God, and low regard for intellectuals. Got your G.E.D.?

Bush changed to a white shirt for his New York City speech on Thursday, after he
had been wearing only a blue shirt (blue collar image) for the last three months.
The change was gradual however, since Bush wore a blue and white checkered shirt
that looked like a tablecloth at his last speech before travelling into New York.
The goal is to make G.W. Bush look like an average guy one would have a beer with.
While two Bush daughters are uncorking $250 per bottle French wine in St. Tropez.
Enough to bring a smile to former librarian Laura Bush decorating the White House.
Lately, Bush's smile is crooked, but not half as crooked as on his VP Dick Cheney.

NASDAQ COMPOSITE INDEX analysis:
Nasdaq Composite closed 1,873.43 +23.02 at 1.27% above its 7-day moving average.
Nasdaq stochastics rose to bearish, extremely overbought on Thursday at 98%/71%.

It's not a breakout to the upside like Cramer tells millions of CNBC viewers.
It's a fakeout like a June 23 fakeout, which was followed by a 6-week decline.
Blame Intel, or blame the recession that has developed from mismanagement of the
U.S. economy by an oil magnate whose only claim to fame is stealing an election.

The sooner Kerry is voted into office, the sooner the U.S. can resume advancing.
No one ever shows Bush using a PC, handheld device, or anything with electronics.
Until the election is decided, the FED will raise rates, oil will be expensive,
stocks to do with PC's will suffer. Buy puts on Dell to offset long positions in
Sun Microsystems (leader in UNIX storage) and AMD (leader in 64-bit technology).

INTC closed 21.63 +0.20 (+0.93%) but lost 7.6% in after hours trading to 19.99.
AMD. closed 11.67 -0.03 (-0.26%) and readers should buy Jan 10 calls at 10.80.
CSCO closed 19.30 +0.21 (+1.10%) remain SHORT. Sold Cisco short Jan. 9 at 29.
see http://www.oocities.org/steve_zito/bulletinboard321.html for previous rec's.
DELL closed 35.51 +0.04 (+0.12%) so buy DELL puts out into 2005 at 32.50 strike.
SUNW closed. 3.97 +0.10 (+2.58%) - recommended to buy SUNW at 3.99 on March 8.
see http://www.oocities.org/steve_zito/ndq030804newsletter.html

Many semiconductor firms traded on Nasdaq are dependent on semifinished products
from Taiwan and Korea, like motherboards and chipset sub-assemblies. Companies
like Dell keep no inventory of inputs but use "just-in-time" business models for
input flows into their Texas assembly operations. When Taiwan motherboard supply
to Dell and others is interrupted, even for a few days, the whole distribution
chain is backed up, and the source of Taiwan production delays is often weather.
In the past week Typhoon "Aere" smashed China, Taiwan, Japan and the Philippines.

On a flip side, Taiwan's economy is based on one industry, making chip wafers.
The world's largest chip foundry, Taiwan Semiconductor Manufacturing Company,
TSM, also trades on New York as an ADR at a substantial premium to its price
on the Taiwan stock exchange, the TAIEX. The reason is that the mutual fund
managers in the U.S. buying TSM as an ADR have no idea they overpay for an ADR.
TSM closed at 7.61, down from 8.30 at end of June when U.S. summer rally ended.
During the bubble, Taiwan Semi used to trade over 20, yet its profits were lower.

Thanks for reading this edition of Stock Market Direction by Steve Zito.
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