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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 Dec.11 Nasdaq Dec. 7 INDEX **INTEL REVIEW** EMAIL

NASDAQ COMPOSITE
INDEX closed 2728.51

Eight of 9 indicators are NEGATIVE
Thur., Dec. 14, 2000

******************Commentary*******************
Dec.14 Nasdaq Composite is going to test the 2700 level again Friday. Expect Nasdaq fails 2700 before recovery from 2550 begins next week. Nasdaq 10-day chart stochastics are now over-sold at 2.56/7.25% (the mirror image of the over-bought 91.85/92.20% Dec. 11) after becoming positive on Dec. 7 at 36.80/23.21%, the last time Nasdaq tested 2700. What makes this situation different from the 300-point rebound in the past week?? Mutual fund managers are selling out of big-profile technology stocks (indicated by a distribution pattern in Microsoft) to avoid showing positions in these losers in mutual funds' year-end statements. Think about it. If you're a 25 yr-old mutual fund manager taking down a salary of $150,000 a year, would you want ANYONE to know you have held Microsoft all year from $119 to $55 in the fund? Microsoft traded 145 million shares Dec. 7. Expect more of the same. Nasdaq 90-day chart stochastics plunging at 37.51/59.05% (compared to a rising 48.27/30.77% Dec. 7) completely breaking down Tuesday when investors realized there was no chance for technology-loving Al Gore to win the Presidency. Nasdaq 2-year chart stochastics eased to 21.47/20.51% from a bullish 48.58/23.22% on Dec. 11 (even a more over-sold 19.27/17.48% Dec. 7). Stochastics on Nasdaq charts turned all positive last week for first time since August. Unfortunately, the rally died after 3 days, when 6 famous brokerage house strategists all proclaimed it the "next bull leg". INTEL stochastics are 53.45/26.14% (compared to 46.26/20.27% Dec. 11) and forecasting sideways trades. Microsoft stochastics breaking sharply at 42.54/23.56% (over-sold at 4.42/25.72% Dec. 7). The year's stock plunge $119 to $55 since Ballmer became CEO indicates that there are many better managed companies. If someone handed you the world's best franchise, could you drive a software leader's stock price down a massive 53.8% in 9 months? CISCO has a risk-lovers P/E of 125.77 and stochastics 55.23/60.90% are falling from the over-bought 91.28/49.75% Dec. 11. My year-long forecasted $48 CISCO target price is about to be tested once more. ORACLE has fallen 15% since Dec. 11. Stochastics are plunging at 28.57/77.17% (compared to 97.09/67.47% Dec. 11. ORACLE has okay P/E of 25.18, but ORACLE is a software company in a technology stock environment including Microsoft. Expect sympathy sell-offs. WORLDCOM stochastics still remaining positive at 80.85/51.99% (from 80.95/36.46% Dec. 11). The stock is not quite over-bought yet. DELL is under $20, with failing 52.44/31.16% stochastics, but a value P/E of 24.34. The US dollar has recently fallen 6.7% against the Euro, adding a boost to DELL's future revenue from foreign exchange on European sales which could lead to + earnings surprise in January.
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