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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.27 Nasdaq Oct.16 INDEX *INTEL REVIEW* EMAIL

NASDAQ COMPOSITE
INDEX closed 3369.63

Six of 9 indicators are POSITIVE
Tue., Oct. 31, 2000

******************Commentary*******************
Oct.31. Nasdaq skyrocketed 5.58%. Yet, the 6 largest Nasdaq leaders only climbed an average of 2.43%, including impressive 12.09% gain by CISCO. Without CISCO, the leaders only rose 0.49% on average. This mediocre performance stems from huge MSFT and INTEL gains last week in advance of today's rally and today the leaders stalled out. Lehman's highly inaccurate analyst team downgraded CISCO just Monday lowering their target price from $90 to $65, and then CISCO immediately plunged to my target price of $48 (forecasted May 18). Today, CISCO recovered to close above resistance ($53 becomes support). Are you tired of brokerage house analysts "whipsawing" your favorite stocks just to generate transaction revenues? Nasdaq is more OVER-BOUGHT than in my last update Oct.27, hitting highest 10-day stochastic readings (94.96/87.43%) today since the Index hit 3520 intra-day and closed at 3480 on Oct.20. The Nasdaq is exhibiting the same stochastic pattern as it did on Oct.19, a day when it gapped at the open up 160 points. If Nasdaq gaps higher tomorrow over 3400, expect a sudden reversal and a renewed sell-off, eventually blamed on a Treasury bond refunding, or the employment report due on Friday. The 10-day stochastics show that Nasdaq is OVER-BOUGHT, which contradicts statements today by the CNBC announcers reporting the news that "FALLING COMMODITY PRICES" and "THE END OF THE OCTOBER TAX SELLING" have changed "MARKET'S TONE FROM BEARISH TO MODERATELY POSITIVE", but a lead CNBC announcer is only trying to sell his book and will never understand the message that the market is giving, that Nasdaq bear markets do not end on specific calendar dates. As the Nasdaq nose-dived 37%, CNBC announcers have called every 100 points "a key support level". Not one of these has held. The Nasdaq Composite 2-year stochastics at 27.84/36.26% (20.45/40.27% Oct.27)remain negative, forecasting a break of 3000 to test long-term support at 2700, last seen in Oct.1999. INTEL rose 30% in just 9 days, daily stochastics became over-bought (at 94.79/65.62% Oct.27) and since then, INTEL has fallen 2.9% while the Nasdaq has risen 91 points. With falling stochastics 82.98/79.83%, look for INTEL to test recent $36 lows if close is negative tomorrow. Microsoft rose 34% in 9 days, became over-bought with stochastics (at 92.77/65.40% Oct.27), more over-bought at 94.24/82.41% now, and MSFT should fall to support at $64. CISCO turned POSITIVE after hitting $48 with stochastics rising to 60.79/48.48% (from 7.28/51.90%) on heavy trading. ORACLE (40.82/57.75%), WCOM (41.01/56.89%) remain neutral. DELL has rising stochastics at 87.72/71.83% (up from 69.44/62.21%), fast approaching over-bought. DELL volume is light.
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