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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 Nov.10 Nasdaq Oct.31 INDEX *INTEL REVIEW* EMAIL

NASDAQ COMPOSITE
INDEX closed 3027.19

Six of 9 indicators are NEGATIVE
Sun., Nov. 19, 2000

******************Commentary*******************
Nov.19 The Nasdaq Composite plunged on Monday, and on Tuesday rebounded sharply just as I forecasted Nov. 10, eventually stalling out at 3180 just when the Federal Reserve decision NOT TO LOWER interest rates was released Tues., Nov.14. I have stated for six months that no rally can be sustained until the Federal Reserve begins to cut interest rates. In the Model Portfolio I entered 4 call option positions when Nasdaq broke 2900 Monday in a first real test of the 2700 level, and exited the positions with 300% gains on Tuesday when Nasdaq rebounded to 3180. The Nasdaq fell after Tuesday's Federal Reserve meeting, and the 90-day chart clearly shows a sustained downtrend, which cost Nasdaq 7.8% in September, 12% in October, and 8.9% this month. With the average loss per month over the last two months at 9.9%, Nasdaq should close out November at 2995, on its way to 2700 in December. Nasdaq's 10-day stochastic readings of 48.48/25.85% (compared to 0.05/15.26% Nov. 10) are weak, confirming the bounce from 2850 to 3180 on Monday/Tuesday was just that, an over-sold bounce. I correctly forecasted these moves in my last commentary. Nasdaq became over-valued in March by all of the brokerage house hype the past 3 years which pushed stocks to unsustainable levels. Nasdaq is not ready for a sustained upside move until interest rates decline. Nasdaq 90-day stochastics are falling again at 27.04/39.20% (compared to 0.02/54.09% on Nov. 10), and Nasdaq 2-year stochastics are not showing any strength at 14.60/23.17% (0.24/27.66% Nov. 10). The 2-year chart clearly shows major support for Nasdaq between 2400 and 2700, to which Nasdaq should fall near the end of the year. INTEL rose 12% last week, (daily stochastics showing good strength at 48.35/37.96%) after successfully testing $36 on Monday, the exact target price I forecasted when the stock was $46 Oct. 31 (&Nov. 10). MSFT rose 34% in late October (but 58.43/61.25% stochastics remain weak), and when the stock was $70, I forecasted MSFT would fall to $64 support. It did exactly that last Monday, and its recent trades look more like a major distribution top than a rally. Blame bad management. The MSFT CEO was ridiculed by a rival CEO at COMDEX last week. CISCO hit my target price of $48 exactly forecast May 18 (&Nov. 10). CISCO (130.25 P/E) with neutral 49.35/55.12% stochastics, is going sideways. ORACLE rose 13.3% last week but fell in the after market Friday after 4 PM. With stochastics strong at 73.91/29.48%, ORCL should be a hold on weakness Monday, as should WCOM, which rallied Tuesday but failed to break $18 resistance, retaining positive stochastics at 20.00/15.41%. DELL stochastics at 23.98/37.97% are falling again, with scant buying interest, but great support at $22.
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