PUBLISHED DAILY - STOCK MARKET DIRECTION - © November 2003
STOCK MARKET DIRECTION by Steve Zito Financial Newsletter
Technical Indicator Analysis of the Nasdaq Composite Index
Individual analysis of the twenty largest technology stocks.
Redistribution only with permission of the writer Steve Zito.
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STOCK MARKET DIRECTION by Steve Zito Email Newsletter for Wednesday, Nov. 26, 2003
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In this issue, if the U.S. economy is so great, how come Dow cannot get to 10,000?
Nasdaq is even more overvalued as CNBC touts Cisco and Dell into outrageous P/E's.
Long options positions on Ciena, short put positions on Tellabs, AMD is worth 15.

Information in this letter is based on prices from Tuesday, Nov. 25, 2003
Dow Jones Industrial Average
----------------------------------------- 9,763.94 +16.15 (+0.17%)
Nasdaq Composite Index
----------------------------------------- 1,943.04 - 4.10 (-0.21%)
Standard and Poors 500 Index
----------------------------------------- 1,053.89 + 1.81 (+0.17%)
10-Year Note yield
-------------------------------------------- 4.186% -0.041

DOW JONES INDUSTRIAL AVERAGE analysis
Dow Industrials closed 9,763.94 +16.15 at 0.5% above the Dow's 7-day
moving average, trending up for 2 days after Friday's option expiration.
Last Wednesday, Thursday, and Friday saw the Dow close at 9625 or near
as technical traders bought that level believing it to be a floor set
by the Dow's 50-day moving average. That is what they were told by CNBC.

In fact, bond yields changed little, signifying a rise in gold stocks (XAU)
to be a false inflation scare. Inflation is bad for stocks. The gold stock
index has risen from 62 to well over 100 in less than a year, and recent PPI
reports validate a pickup in prices at the wholesale level. A pack of smokes
in New York or an Atlantic City casino costs over $8 compared to $3 when Mr.
Clinton was President. University tuition costs are rising 20% every year.
Fortunately, the majority of Americans don't smoke or go to universities.

Why do the smoking habits and educational levels of Americans affect Dow
stocks? The best performing stock in the Dow during the Bush years has been
Altria Group (MO), the maker of Marlboros. The largest PC and tech stocks
in the Dow are Intel and Microsoft, makers of hardware and software to get
on the Internet. The most common use for Internet is downloading music and
sending email, spending five hours a day doing that in the teenage years is
why kids never studied enough to get accepted to college. Internet use does
not improve SAT scores, contrary to wide belief. The most accessed sites on
the internet are NBA.com, Hustler magazine (with Jessica L. pics) and J-Lo.

While CNBC touts merits of the Dow's rise from 7500 to 9900 in 8 months,
citing a new PC upgrade cycle and U.S. GDP growth revised upward to 8.2%,
the products produced by the Dow's leaders, Intel, Microsoft, Boeing, MO,
those are, PC chips, Windows software, attack helicopters, and cigarettes,
do very little in the way of advancing society. If the Dow cannot go up
more than 16.15 points (Tuesday) on the day the government says growth
is 8.2%, highest in 20 years, something is seriously wrong. The argument
that stocks are overvalued is too simplistic. It is more likely the future
does not hold the fantastic job growth that CNBC (chief economist) predicts.

It is more likely the U.S. will continue to spread its uneven distribution
of wealth model to the rest of the world, creating corruption and crime as
poverty stricken individuals resort to attacks for getting basic needs met.

The Bush model is called freedom and democracy, but what it really breeds
is crime and corruption. As headlines read, Iraqi insurgents turn attention
to attacks on police and civilians, what difference is it from a large city
in the USA? The U.S. GDP growth revision to a hot 8.2% from 7.2% would have
caused a 400-point move in the Dow four years ago. Today, professionals are
selling into the rally, with insider selling swamping insider buying 5-to-1.

Eliot Spitzer has targeted the mutual fund industry and stuffed shirt CEO's
and will put 3 or 4 into jail to make a show while the other 9000 walk free.
Is that freedom? Letting those who control the invested assets of 85 million
households trade on your money after hours, and get away with it? Freedom?

The Dow has quickly risen from oversold at last Friday's option expiration
to finish with stochastics at overbought 82%/70%. The seasonal pre-holiday
rally occurred on Monday, and could continue Wednesday. Expect 50-pt. range.
Definition: STOCHASTICS — Measures at what height the price of a security
is within the entire trading range of the security in a given time period.

Remember, the Dow forecasts the future, and the Dow is telling us that
next year will not see 8.2% economic growth. Tax cuts were a one-time
stimulus, as taxpayers spend the extra money, it is gone. Medicare bills
may get votes from rich people who won't have to pay for their medicine
again, but not from low-income who cannot afford the yearly deductible.

The stock market is telling us that economic growth will be uneven and
sharply reduced from the current 8.2%, about the time that Mainland China
becomes the world's largest semiconductor and personal computer producer.
China has a plan to be the world leader in PC's by late 2004, early 2005.
With Intel building plants there, how hard would it be to steal designs?

The XAU Gold stock index has done nothing in the past week. Closing at
XAU 104.62 +1.83 (+1.78%), the gold stock index is up from 88 on Oct. 3.
Stochastics are overbought at 82%/77%. Many months ago, I recommended
Dec. 100 calls which are now deep in the money. Expect rise to XAU 108.

NASDAQ COMPOSITE INDEX analysis
Nasdaq closed 1,943.04 -4.10 at 1.0% above a 2-day uptrend. Stochastics
are overbought at 82%/75%, down from Monday's 100%/50%. Like the Dow
failing to climb to 10,000, Nasdaq is unable to hurdle 2000. Strange, as
the U.S. economy is growing 8.2% and Dan Niles is issuing buy signals on
the largest tech firms in the Nasdaq. Part of Nasdaq's surge on Monday was
in biotech, which awoke from a slumber begun in August. China has a SARS
vaccine in the works, Britain has an Anthrax vaccine, and Viagra now has a
5-hour competitor for men who need to swing bats for entire double headers.
What next for Nasdaq? If 8.2% GDP growth can't send it over 2000, what will?

BTK closed 458.68 -2.69 (-0.58%) at 1.4% above a new uptrend. Stochastics
fell from 100% to 81%/77%. Biotech had been at the lowest since mid-August
one week ago before vaulting 4% on Monday. Was it short-covering? Yes.

Intel INTC last 33.07 -0.39 (-1.17%) at 0.7% above slightly bearish trend.
Stochastics down from overbought to 70%/75%. Intel is betting on China.
-------
AMD closed 17.49 +0.08 (+0.46%) at 1.6% above its new 2-day uptrend.
Stochastics rebounding quickly to 75%/51%. AMD just is not worth 18.
Buy AMD Dec. 18.00 puts AMDXX when they are trading under 1.00 (0.95).
AMD Dec. 18 put AMDXX closed 1.20 unch Bid 1.00 Ask 1.05 vol 0 oi 1,444.
-------
Microsoft MSFT is 25.40 -0.33 (-1.28%) at 0.0% below a major downtrend.
Stochastics falling to 28%/45%. European Union dislikes MSFT practices.
While CNBC praises Bill Gates as U.S.' most charitable person, Gates is
hoarding enough cash in MSFT coffers to hire 1 million jobless Americans.
Not only that, he lets a bankrupt state of Washington government subsidize
the Puget Sound ferry so millionaire Microsoft employees can get to work.
-------
Cisco CSCO closed 22.62 -0.18 (-0.79%) at 1.1% above a 2-day uptrend,
stochastics overbought 77%/80%. I say it will go down, unable to top 23.
Like many tech stocks touted by CNBC, the price/earnings is outrageous.
-------
Oracle ORCL closed 11.87 -0.18 (-1.49%) at 1.1% below trading range slide.
Stochastics nearing oversold at 23%/28%. ORCL lately unable to top 12.70.
-------
DELL Computer last 34.36 -0.78 (-2.22%) at 1.0% below 1-month downtrend.
Stochastics sliding again to 30%/51%. Earnings report had been no surprise.
Yet since the earnings came out as expected, Dell has lost 6.6% in 2 weeks.
-------
Sun Micro SUNW closed 4.27 +0.03 (+0.71%) at 2.6% above slight uptrend.
Stochastics 70%/54%. Sun makes servers, IBM makes servers, and Dell too.
Sun Micro lost 1% in server sales in 3rd Quarter to drop to an 11% share.
Merrill's top analyst said publicly, that Sun has to cut workforce by 22%
and drop unprofitable product lines. Sun's CEO said it will never happen.
-------
Ciena CIEN closed 6.91 -0.12 (-1.71%) at 2.4% above a 6-day uptrend.
Stochastics fell to 77%/82%. Recommended in a Thomas Weisel upgrade.
CIEN April 10 EUQDB last 0.40 -0.05 Bid 0.35 Ask 0.40 vol 65 oi 3,837.
Readers bought up to 50 EUQDB contracts at 0.25 on Tuesday, Nov. 11.
-------
Tellabs TLAB closed 8.12 -0.10 (-1.17%) at 0.5% above fading uptrend.
Stochastics fell to 58%/62%. Recommended DEC puts on a close over 8.06.
TLAB Dec. 7.50 TEQXU closed 0.15 -0.10 Bid 0.15 Ask 0.25 vol 10 oi 2,557.
Readers bought up to 200 TEQXU contracts at 0.20 on Wednesday, Nov. 12.
-------
Qualcomm QCOM last 45.58 +0.46 (+1.02%) at 0.1% above new 2-day uptrend.
QCOM had corrected from 48.40 down to 43.60 in only 6 days to expiration.
Stochastics up to 72%/33%. Like Intel, Qualcomm is betting heavy on China.
Why are these tech darlings betting on China? Cheap labor and 1.3 billion
customers in a market that will be directed by the Communist dictatorship.
Economists on CNBC claim that creating wealth in China will lead to a more
open society, but in fact, anyone who has been to China doesn't feel free.

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