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

NASDAQ COMPOSITE
INDEX closed 2624.52

Eight of 9 indicators are NEGATIVE
Mon., Dec. 18, 2000

******************Commentary*******************
Dec.18 Nasdaq Composite tested the 2550 level again. Expect 2550 to hold and Nasdaq to recover this week, but only 10%. Nasdaq 10-day chart stochastics are less over-sold at 21.01/36.43% than Dec. 14 level 2.56/7.25% when Nasdaq was 104 points higher. What does it mean? The short-term chart is forecasting sideways trading similar to action occurring on Dec. 7 the day before Nasdaq staged a 2-day 9.5% rally. Stochastics on the 90-day chart are forecasting quite some churning, plunging at 13.16/58.85% (compared to falling 37.51/59.05% Dec. 14), just like they did on Nov. 10, before Nasdaq began 2-day 8.1% rally. Stochastics on the 2-year chart turned negative at 12.84/19.50% from a bullish 48.58/23.22% on Dec. 11 but are over-sold enough to predict a Nasdaq rally to 2950. What makes this situation different from the seven 250-450 point rebounds in the past two months? Mutual fund managers are clearing out of big-profile technology stocks (evidenced by an astounding 10.87% drop Monday in CISCO right through my year-long forecasted $48 target price. Growth funds need to avoid showing positions in big losers in mutual fund year-end statements. Every investment house and analyst touts CISCO as a sure winner, but quietly dumped 126 million shares Monday. Expect more selling. INTEL stochastics have begun rising at 28.83/29.84% (compared to 53.45/26.14% Dec. 14) and are suggesting some short-term strength. MSFT stochastics broke sharply to 6.02/24.20% (versus 4.42/25.72% Dec. 7, then the stock rallied from $52 to $60). The plunge from $119 to $47 since Ballmer became CEO finally forced him to make dramatic cost reductions. As the most over-sold big-cap Nasdaq tech leader, I added MSFT to the Model Portfolio Monday at $47 (and SUNW $28). CISCO has a RISK-lovers P/E of 106 and its 1.44/59.59% stochastics have nose-dived from a neutral level of 55.23/60.90% on Dec. 14. No brokerage describes CISCO as cheap but they all tell you to buy it. ORACLE surged 16.4% since closing below $29 support on Dec. 14. Stochastics are OVER-BOUGHT at 90.48/74.54% (vs 97.09/67.47% on Dec. 11, the last time ORACLE closed at $32). For first time this year, ORACLE has a higher P/E of 28.22 than Microsoft's P/E of 27.03. The media attributed ORACLE 2-day rise to reinvestment of MSFT sales. WORLDCOM stochastics fell to 51.06/56.47% (from 80.85/51.99% on Dec. 11). The stock is negative again closing under support at $16.50. DELL is under $20, with 43.90/39.18% stochastics ready to go higher, and a value 23.81 P/E. The US dollar has recently fallen over 7% on the Euro, adding a gain to DELL's Dec. revenue on foreign exchange from European sales, which could lead to robust earnings surprise.
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