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

NASDAQ COMPOSITE
INDEX closed 2517.02

Five of 9 indicators are POSITIVE
Mon., Dec. 25, 2000

******************Commentary*******************
Dec.25 Nasdaq Composite is hugging 2550 level, I expect 2550 to hold and Nasdaq to recover about 20% next month. Nasdaq's 10-day chart stochastics OVER-BOUGHT 99.56/80.02% (vs 21.01/36.43% Dec. 18). The short-term chart is forecasting consolidation (selling) for the rest of the year. Stochastics on 90-day chart predict weakness and remain negative at 30.91/33.87% (vs 13.16/58.85% Dec. 18). Stochastics for a 2-year chart at 18.36/19.31% (vs 12.84/19.50% Dec. 18) are indicating long-term bottom in Nasdaq is in place. They are very OVER-SOLD, enough to forecast a long-awaited January Nasdaq rally to over 2950. What makes the current 2-day rally different from eight 250 to 450 point rebounds in the past three months? Mutual fund managers are clearing out of big-profile technology stocks (how about astounding 18% drop in Microsoft early this week from $49.50 to $40.50). Growth funds are desperate to avoid showing positions in stocks with losses this year in the mutual fund year-end statements. Every investment firm and technology analyst recommended CISCO as a sure winner, while quietly selling out some very large holdings in the last 2 weeks. INTEL stochastics 31.25/43.21% (compared to 28.83/29.84% Dec. 18), are suggesting imminent year-end tax-loss selling. MSFT stochastics rallied nicely to 83.08/82.73% (vs 6.02/24.20% Dec. 18) as the stock rallied from $40.50 to $46.50 in the past two days. Year's plunge from $119 to $40.50 since Ballmer became head of Microsoft finally forced dramatic cost reductions and a company-wide management review. As the most over-sold big-cap Nasdaq tech leader, I added MSFT to the Model Portfolio at $47 (and DELL at $18). CISCO has an extreme P/E of 102.47, yet CISCO 88.97/82.07% stochastics have rebounded (vs 1.44/59.59% Dec. 18). No brokerage will advise you that CISCO is cheap, yet they urge the public to buy. If the public is advised to buy CISCO, then it is easier for mutual fund managers to dump holdings. ORACLE hit $32 four times in 3 weeks and failed to break through it each time. I exited my position in the Model Portfolio. Stochastics are very over-bought at 97.03/80.74 (vs 90.48/74.54% Dec. 18 the last time ORCL hit $32). ORCL now has a higher P/E of 28.11 than Microsoft's P/E of 26.25. Media states ORACLE's recent 50% rise is reinvestment of MSFT sales. If true, ORACLE would be trading over $45. WCOM stochastics are negative 58.33/18.89% (vs 51.06/56.47% on Dec. 18). Worldcom has resistance at $14. Despite 8.48 P/E it appears investors no longer trust Worldcom management. DELL is under $20 and with heavy volume in short-term call options at $20, stochastics rising at 80.77/73.70% (vs 43.90/39.18% Dec. 18). The US dollar has fallen 12% against the Euro this month, adding a boost to DELL's Dec. revenue.
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