Steve Zito (MS Finance) is a member of the HTML Writers Guild
using economic and technical analysis to forecast 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 May 9 DOW May 11 INDEX Market Data INTEL Review

NASDAQ COMPOSITE
INDEX closed 3607.65

Six of 9 indicators are NEGATIVE
Mon. May 15, 2000

******************Commentary*******************
May 15. The Nasdaq Composite is testing the highs it made on May 9 and May 12, finishing with a very strong close in today's last hour, a 100-point gain that put the index in very over-bought condition on the 5-minute and 15-minute charts. The index rallied most of the day, with 2/3 of the gain coming in the last hour. While the 5-minute and 15-minute charts look very over-bought, the 30-minute and 60-minute charts show more upside tomorrow. To confirm this, expect a very sharp lower opening on the release of the Consumer Price Index, then a rebound to test again those May 9 and May 12 highs. The 2-month-old Nasdaq bear market began March 10, the day momentum peaked out. Prices peaked later on March 27. Nasdaq's current rally is entirely due to stock options expiration this week. Nasdaq should test the 3138 level soon, and FAIL! On April 11, I forecasted an 11% range around 3650, which Nasdaq has done, but with Microsoft's problems, Cisco's overvaluation, and sentiment not nearly bearish enough, a bottom is not in place. The Daily Nasdaq chart shows the index below the 20-day moving average (3723), negative stochastics improving to 29.96%/40.24%. The Weekly chart shows the index 345 points below the 20-week moving average (3952) with MACD and stochastics also negative. The Monthly chart stochastics are poor. This weakness will continue until the U.S. Federal Reserve lowers interest rates. Investment strategists showed up Friday on cable TV financial news to take credit for the current rally. Remember, they don't know any more than you do where the Nasdaq Composite is headed. Despite their new economy hype, "click-throughs" have not yet replaced "profit margins" for valuation of stocks. The Nasdaq Composite is above the 20-period MA on the 5-, 15-, 30-, 60-minute, Monthly charts. Intel is trading from 110 to 130 which I predicted April 26. At 118, Intel is no bargain with a P/E ratio of 51 and facing intense new competition from AMD. On any rally, Intel is a sell at 122, and a buy on weakness at 102. Microsoft looks like a hold. MSFT's MACD and stochastics are positive. Cisco's MACD and stochastics are very negative. CSCO is a sell at 64, and a buy at 48. CSCO sports a P/E ratio of 169. Oracle Corp also has a high P/E at 120. ORCL closed today at 77 above its 20-day moving average of 74, but MACD and stochastics are negative. Today's close is not a "break-out". MCI Worldcom fell below support on Friday. I exited 50 June 55 calls on MCI WCOM with a 50% gain in the Model Portfolio on Friday's news coming from the annual WCOM stockholders meeting. Dell also has a sky-high P/E of 79, well above normal for computer distributors.
Copyright Notice, all pages Copyright©2000 and are made available as a service to the global Internet community. Pages may not be reproduced or sold in any medium without explicit, written permission from Steve Zito.