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 for investment decisions.
Nasdaq Oct. 2 Nasdaq Sept.25 INDEX *INTEL REVIEW* EMAIL

NASDAQ COMPOSITE
INDEX closed 3240.54

Nine of 9 indicators are NEGATIVE
Tue., Oct. 10, 2000

******************Commentary*******************
Oct.10. Nasdaq lost 3.43%. Every day looks like a bottom but a smash may yet come next week. Not including the 2.41% gain by Worldcom, the leaders dropped an average 3.29%. Shows downside momentum is widespread. CNBC announcers glorify brokers strategists proclaiming "BUY" at 3200. YEAH, right! These simpleton CNBC announcers will NEVER UNDERSTAND THE MESSAGE THE MARKET IS GIVING. Although INTEL and DELL are so deeply oversold that any day now could see a nice upside bounce similar to April's volatile 3-day rallies, constant electronics stocks downgrades by Lehman's Dan Niles on the same high fliers he pumped up over the last 2 years is causing so much confusion among traders that Nasdaq is likely to over-shoot on the downside to hit 2700 before rate relief from the Federal Reserve. On May 3 before the summer rally, I recommended exiting over-valued INTEL, CISCO, and DELL at the top of Nasdaq's trading range 4200, until the Federal Reserve lowers interest rates. I repeated the advice July 9 when I correctly forecasted DELL at $53 would drop by 50% to a more reasonable P/E of 38. Since then, DELL has plunged $28 (54%) despite every major brokerage recommending BUY since $50 in July. An example of this, Bank of America's Kurtis King announced on CNBC Oct. 2 that Compaq is going to $48, Gateway is going to $90. Since that call, both stocks have plunged. Keep in mind that while all brokers are reporting RECORD profits and paying bonuses to myopic analysts, the investing public LOSES 10% a day on the downgrades from those analysts. Nasdaq should have rallied at 3500, but did not. Daily stochastics are at an over-sold 7.47/33.19%, amid record levels of margin debt, and could be many investors have been burned by volatility in Internet stocks, pushed up by mediocre broker analysts. MSFT is the strongest of the Nasdaq leaders with stochastics rising at 14.79/11.66%, limited by upside chart resistance at $57.25 and $62.
I downgraded INTEL over 5 months ago (see INTEL REVIEW) when it was $65 with a target price of $39 based on price/earnings analysis and research. On Sept.12 at $65, I said INTEL would drop below $50. The stock is at $37, and deeply over-sold with 1.52/5.52% stochastics. If Merrill's "AWARD WINNING ANALYSTS" got you into INTEL at $75 with a target price of $100 six weeks ago, then downgraded INTEL last week (like Altera and Xilinx today), that cost you a lot of money. CISCO (P/E 142.81) joined the party with a 4.77% drop, stochastics are still over-bought. ORCL traded 3.18% lower, stochastics falling at 19.02/37.64%. WCOM bottomed Sept.27 at $26, spurted 17%, became very over-bought, tested $26 again, falling 26.88/45.24% stochastics. Congratulations to Ashok Kumar for calling semiconductors peak!
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