PUBLISHED DAILY - STOCK MARKET DIRECTION - © December 2003
STOCK MARKET DIRECTION by Steve Zito Financial Newsletter
Technical Indicator Analysis of the Nasdaq Composite Index
Redistribution only with permission of the writer Steve Zito.
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STOCK MARKET DIRECTION by Steve Zito Newsletter for Monday, Dec. 8, 2003
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Options strategy, hold PUTS in December, accumulate CALLS for April 2004.
Expect Bank of Japan to intervene for a sliding dollar, to help exports.
Strategic referendum for Taiwan on independence set for next March 20
while Bush ENTERTAINS the Communist Chinese leadership at White House.
http://news.yahoo.com/news?tmpl=story&u=/afp/20040228/wl_afp/taiwan_vote_040228165808

Information in this letter is based on prices from Friday, Dec. 5, 2003
Dow Jones Industrial Average
----------------------------------------- 9,862.68 -68.14 (-0.69%)
Nasdaq Composite Index
----------------------------------------- 1,937.82 -30.98 (-1.57%)
Standard and Poors 500 Index
----------------------------------------- 1,061.50 - 8.22 (-0.77%)
10-Year Note yield
-------------------------------------------- 4.215% -0.154

DOW JONES INDUSTRIAL AVERAGE analysis
Dow Industrials closed 9,862.68 -68.14 at 0.1% above the Dow's 7-day
moving average, which had been gaining for the last 9 trading days.
Dow stochastics (where the Dow is relative to its most recent range)
are falling coincident with Friday's selloff, into neutral at 33%/68%.
Hey, what gives? The GDP is growing 8.2%, productivity is up 9.4%,
and even the number of jobless in the USA fell to 5.9% in November.
If you listen to the hype on CNBC, the Dow Jones should be at 11,000.

As I wrote this year, stocks are telling us employment will stay weak.
Labor Sec. Elaine Chao appeared on CNBC with her very foreign accent
and when asked about the less than expected 57,000 new jobs added in
November's payroll survey, dismissed that number as "undercounting
hidden strength" and then this Labor Sec. claimed that Bush tax cuts
have created 2 million jobs in the last nine months. That claim has as
much credibility as Mr. Bush's assertion Iraq hostilities ended May 1.
Remember when Bush landed on an aircraft carrier for his mission spin?

The only employment Bush and Chao create are outsourced jobs to China.
Why Elaine Chao misrepresents American workers is as puzzling as the
whereabouts of Saddam Hussein. Acting U.S. field marshal, excuse me,
General Sanchez said in Iraq that looking for old man Hussein is like
looking for a needle in a haystack. Elaine Chao went on to tell CNBC
and viewers that things are great, that her "household" survey shows
200,000 jobs were added last month, not the 57,000 reported by BLS.
Chao takes exception to the Bureau of Labor Statistics methodology
by explaining payroll surveys do not report workers who were fired
and immediately rehired by another company. Chao said her household
survey does reflect this transient employment in more accurate form.

This Cabinet level tilt by the Bush team reminds of body kill reports
from Vietnam during Dick Nixon's monarchy. In those days (1968-1973),
the U.S. military used napalm (gasoline bombs) to defoliate jungles
and obliterate the enemy. Any dead without a uniform were not counted
as enemy casualties, kind of like Elaine Chao's description of BLS data
not counting all of the re-employed who were recently terminated first.
That's real fine when a worker can get another job within a few weeks.

When asked about the long-term U.S. unemployed, Elaine Chao claimed
the Bush government has training programs to give them new skills.
She did not mention what to do with outdated 4-year college degrees
and 2-year MBA's which are useless in today's world of oil security,
airport checkers, border patrols, rap stars, and NBA rookie phenoms.

Never mind the problem is that companies are cutting back payrolls.
What good are new skills for steel workers in Pittsburgh (Bush has
visited Pennsylvania 23 times for votes, more than any other state)
when there are no jobs in Pennsylvania for anyone, new skills or not?
I take that back. Pennsylvania has more soldiers in Iraq than others.
And Pennsylvania has the 3rd highest number of dead American soldiers.
Only worse is the number of Pennsylvania jobs Bush outsourced to China.

Judging by first place for all Philadelphia's sports teams, at least
the out-of-work blue collar Philly boo birds have something to cheer.
After winning 8 games in a row, the Philadelphia Eagles are headed
for the Super Bowl to meet New England. Rush Limbaugh is rolling
over in his medicine cabinet at the success Eagles QB McNabb has.
At season's start, Limbaugh said black McNabb was a media creation.
Rush was fired, like NBA star Rick Barry, blacklisted from sports TV.
Limbaugh also lit a fire under McNabb and the entire Eagles squad.
Good riddance to Limbaugh. Finally McNabb will bring Philly a title.

I don't like the employment picture, since tax cuts by Bush do not
create jobs. Tax cuts put more money into the hands of those who
don't need it. Poor people and those without jobs do not pay taxes,
and don't receive any tax cuts or rebates. Basic needs are not met.
While those receiving big tax cuts are out buying a new Lexus SUV,
those who need money are finding state budget cutbacks failing them.

Take Pennsylvania, which Bush campaigners regard as key for votes.
In Pennsylvania, the state ran out of money ($12 billion spent) for
low cost health insurance ($30 per month) for the unemployed, and
those earning less than $10,000. State funds ran out in late 2002.
Those in need of this low cost health maintenance now pay $280 per
month with $1000 deductible, go on a waiting list for low cost plan.
In the past year, no one has left the waiting list. Thousands in Iraq
are receiving free medical treatment from the U.S. military and Bush.
The U.S is spending $87 billion a year to help 24 million Iraqis, and
Bush's administration is spending little for 1 million Pennsylvanians
without health insurance or heating oil money who desperately need it.

Those who believe in hands off government, and cutting taxes to zero,
believe the U.S. is an economic marvel. They don't believe in Santa.
Make a deal with these types, they will pick your pocket with a smile.
The country is run by such, and the increasing support for left-wing
Democratic candidate Howard Dean (front runner) is by those who object.
Dean does not represent just have-nots. Dean represents the disgusted.
Unfortunately, like Nixon, the Bush team has already begun a campaign
of dirty tricks, spreading stories Dean claims Bush conspired for 9/11.

The election campaign next year will be increasingly nasty and distorted
as Bush strives to keep power at all costs. Expect a worst case scenario
because stocks generally price in the worst case. If Bush appears to win
and gain momentum as Dems trade first place in primaries with one another,
stocks will advance. If Dean emerges as a clear contender in NH and Iowa,
and wins all the major primaries, stocks will decline to discount Dean.
Dean may be great for America's image, but he is no good for money trees.
Most of the wealthy upper crust find money comes from their family tree.

Aside from domestic politics swaying stocks, Bush will entertain heads
of Communist China this week, while Taiwan just decided to hold a vote
on March 20 to declare independence from China if China does not disarm
496 ballistic missiles aimed at that tiny island of 20 million. Unlike
the Communist trade outlet (pegged exchange rate) of Hong Kong, Taiwan
actually practices freedom, democracy. Taiwan has prospered economically
despite no recognition as an independent nation from anyone but S. Africa.

While Hong Kong spread SARS indiscriminately to the rest of the world,
which devastated Toronto's economy last winter, Taiwan stands up to the
Communist regime in China like patriots did in the U.S. revolutionary war.
Realistically, Taiwan would not last more than 2 days against China's vast
horde of weapons of mass destruction (1000's missiles aimed at U.S. coast),
but they are a symbol of resistance, unlike Hong Kong which just sold out.
Intel and others are dependent on Taiwan for semiconductor motherboards.
If China invades Taiwan after a March 20 vote, US tech stocks will crash.
http://news.yahoo.com/news?tmpl=story&u=/afp/20040228/wl_afp/taiwan_vote_040228165808

Republican conservatives should be pressing Bush to chide China this week
but instead they are worrying about whose face appears on U.S. coinage.
Republicans want the greatest U.S. president removed from ten cent coins
and replaced with Ronald Reagan, according to insiders crafting the deal.
Republicans seek to have Ronald Reagan replace Roosevelt on U.S. dimes:
http://www.usatoday.com/news/washington/2003-12-05-reagan-dime_x.htm

Ronald Reagan once said, "Politics is supposed be the 2nd oldest profession.
I have come to realize it bears a close resemblance to the 1st, prostitution."
That from the U.S. leader who created 12.6% unemployment from 1980 to 1982.
Almost as notable as Nixon, who crafted the 1972 "one-China policy" which
abandoned Taiwan to favor recognizing China prior to Nixon's state visit.

Philadelphia GOLD and SILVER Index XAU
XAU closed 111.33 +2.01 (+1.84%) at 1.2% above its steep 20-day uptrend.
Stochastics recovered to 74%/68%. Dollars are continuing down Sunday night
in Tokyo trading versus Japanese Yen. Intervention time, since a stronger Yen
will hurt an export-oriented Japanese economy. EXPECT Bank of Japan to buy $$$.
The Japanese Nikkei Dow Jones opened down 100 points (at 7 PM EST on Sunday).
Short dollar accounts will cover, the dollar will spike, gold will correct.
When traders start taking gold profits, XAU will plunge to 105 very quickly.

NASDAQ COMPOSITE INDEX analysis
Nasdaq closed 1,937.82 -30.98 at 0.9% below a new downtrend. Stochastics
have fallen to 3%/25%, down from a Dec. 1 overbought at 100%/98%. Every
day, CNBC tells viewers that Nasdaq is only days away from crossing 2000,
and Thursday, Maria Bartiromo even compared crossing 2000 to that 5000
peak which Nasdaq achieved just over 3 years ago. Back then, Bartiromo
appeared from the floor of the exchange and exclaimed, "Folks, how high
can we go! We're goin' to 10,000!" In those days, a bigmouth was selling
her book (on the NY Times bestseller list), promising stocks always go up.

Why would a TV network tout higher stocks regardless of private beliefs?
CNBC announcers get paychecks signed by GE, maybe it's a stock they hold.
Like Wall Street analyst Dan Niles who worked for Compaq for 8 years,
and likely has that in his retirement account, they want a higher GE.

The two adages which CNBC never remind viewers are "buy low, sell high"
and "with great rewards, one must assume commensurate risks." Since CNBC
pundits don't use words as large as commensurate, try "no pain, no gain."
All year long, the wealthy who bought last March made gains without pain.
America's small public investors sold out before March to conserve cash.
Is it too late to go bullish on Nasdaq tech? No, buy biotech in late Dec.
From big-cap leader Amgen AMGN to speculative favorites DNDN, OXGN, the
Biotech group (Index BTK) has been correcting since Sept. 19, at BTK 500.

Phila. Semiconductor (Chip Stock) Index SOX
SOX closed 498.86 -16.44 (-3.19%) at 3.3% below a 7-day moving average.
Looks like a double top was put in for the SOX at 532. If so, watch 496
to see the support break. Stochastics cratered from overbought to 3%/20%.
-------
Intel INTC last 32.10 -1.44 (-4.29%) at 3.0% below a brand new downtrend.
Stochastics down from overbought to 2%/23%. Intel is betting on China.
Why not? Who else has NO taxation, unlimited labor, cheap outsourcing?
-------
AMD closed 16.07 -0.59 (-3.54%) at 5.9% below a serious new downtrend.
Stochastics plummeting to 10%/15%. AMD has made a double top at 18.20.
AMD Dec. 18.00 puts AMDXX were accumulated under 1.00 (at 0.70 to 0.75).
AMD Dec. 18 AMDXX closed 1.85 +0.05 Bid 2.00 Ask 2.15 vol 32 oi 3,037.
-------
Microsoft MSFT is 25.98 -0.22 (-0.84%) at 0.7% above its sucker spike.
Stochastics reversed to 45%/55%. European Union dislikes MSFT practices.
-------
Cisco CSCO closed 23.75 -0.23 (-0.96%) at 1.9% above nice 9-day uptrend,
stochastics high 75%/77%. In a market correction, Cisco will fall faster.
Bgt. Dec 22.50 puts CYQXX at 0.15 +0.05 Bid 0.15 Ask 0.20 v 262 oi 31,765.
-------
Oracle ORCL closed 12.74 -0.25 (-1.92%) at 1.2% over its fading uptrend.
Stochastics falling from overbought to 65%/79%. Could easily be 12 soon.
Bgt. Dec 12.5 puts ORQXV at 0.20 unch Bid 0.20 Ask 0.25 v 470 oi 34,928.
-------
DELL Computer last 34.50 -0.73 (-2.07%) at 0.9% below 6-week downtrend.
Stochastics plunged to 12%/49%. CNBC showed Michael Dell answering calls
from prospective customers for a day. So? Let's see Dell eat at McDonalds.
If Bush outsources the U.S., Hong Kong's Legend Group will eat Dell's lunch.
-------
Sun Micro SUNW closed 4.391 -0.149 (-3.28%) at 0.7% above a fading trend.
Stochastics 40%/71%. Sun makes servers, IBM makes servers, and Dell too.
Since May 2000, Dell fell from 50 to 35, and Sun Micro went from 64 to 4.
-------
Ciena CIEN closed 6.925 -0.105 (-1.49%) at 0.7% below sideways trend.
Stochastics slid to 22%/24%. Recommended readers buy April 10 calls.
CIEN April 10 EUQDB last 0.25 -0.10 Bid 0.25 Ask 0.35 vol 27 oi 3,944.
Readers bought up to 50 EUQDB contracts at 0.25 on Tuesday, Nov. 11.
-------
Tellabs TLAB closed 7.79 -0.11 (-1.39%) at 1.1% below sideways trend.
Stochastics fell to 32%/33%. Recommended DEC puts on a close over 8.06.
Recently, TLAB's 7-day moving average peaked at 8.09 on November 28.
TLAB Dec. 7.50 TEQXU closed 0.15 unch Bid 0.15 Ask 0.25 vol 0 oi 3,372.
Readers bought up to 200 TEQXU contracts at 0.20 on Wednesday, Nov. 12.
-------
Qualcomm QCOM last 49.48 +0.38 (+0.77%) at 5.7% above very steep uptrend.
QCOM had corrected from 48.40 down to 43.60 before last options expiration.
Stochastics up to 91%/73%. Like Intel, Qualcomm is betting heavy on China.
-------
3M Co. MMM closed 80.74 -0.56 (-0.69%) at 0.3% over uptrend. Advancing
steadily to highs on surgical mask sales. Stochastics falling to 60%/78%.
Winter could bring return of SARS from China, masks are in short supply.
-------
TM closed 63.08 -0.86 (-1.35%) at 1.5% over uptrend. Stochastics 72%/80%.
Recommended to readers to buy for long-term hold back in summer at TM 52.
Toyota has passed Daimler-Chysler worldwide, and rapidly closing on Ford.
-------
Nortel NT last 4.31 -0.08 (-1.82%) and Lucent LU last 3.05 -0.04 (-1.29%).
Continue to hold Nortel and Lucent, first recommended early in Oct. 2002.
I recommended Lucent as late as August 2003, when it was trading at 1.88.

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