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 15 DOW May 11 INDEX Market Data INTEL Review

NASDAQ COMPOSITE
INDEX closed 3717.57

Five of 9 indicators are POSITIVE
Tue. May 16, 2000

******************Commentary*******************
May 16. The Nasdaq Composite gapped open through 3700, passing the highs it made on May 9 and May 12, bursting through with a very strong rush in today's first hour, a 100-point gain that put the index in very over-bought condition on the 60-minute chart, see Market Data. The index stalled at 3700 most of the day. While the 5-minute and 30-minute charts are still over-bought from Monday, the 60-minute chart joined them to foretell a sell-off tomorrow. The forecast May 15 of a lower opening today on the release of the Consumer Price Index never materialized, but a forecasted rebound to test the May 9 and May 12 highs did, and the highs were easily surpassed. Is the bear market over? The 2-month-old Nasdaq bear market only began on March 27, and still has many months left. Nasdaq's current 3-day bounce is entirely due to stock options expiration this week. After that, Nasdaq should test the 3138 level. On April 11, I forecasted an 11% range around 3650, which Nasdaq has held nicely for five weeks, but with Microsoft's problems and sentiment not nearly bearish enough, no bottom is in place. The Daily Nasdaq chart shows the index below the 20-day moving average (3723), but stochastics moving positively at 40.99%/38.88%. The Weekly chart shows the index 225 points below the 20-week moving average (3942) with MACD and stochastics negative. The Monthly chart stochastics are poor. This weakness will continue until the U.S. Federal Reserve lowers interest rates. Investment strategists showed up all day on cable TV financial news to tell investors to jump in on a 50-basis point hike in interest rates today. These "gurus" obviously do not have any credit card debt and interest payments tied to the Prime Rate like the rest of America. Remember, they know less than you do where the Nasdaq Composite is headed. They are not at home all day trading stocks, they still have go in to work at 5 AM every day. The Nasdaq Composite is above the 20-period MA on the 5-, 15-, 30-, 60-minute, and Monthly charts. Intel is trading from 110 to 130 which I predicted April 26. At 122, Intel is no bargain with a P/E ratio of 53 and facing intense new competition from AMD. On today's rally, Intel was sold heavily at 122, predicted on May 15 and will be a buy on weakness expected in the next week. Microsoft looks like a hold, MACD and stochastics are more 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 171. Oracle Corp also has a high P/E at 123. ORCL closed today at 79 well above its 20-day moving average of 75, but MACD and stochastics are negative. MCI Worldcom moved back above resistance (now support) on a rebound in European telecom stocks. Dell also has a sky-high P/E of 78, well above normal for computer distributors. Dell has great downside risk.
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