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 16 DOW May 11 INDEX Market Data INTEL Review

NASDAQ COMPOSITE
INDEX closed 3538.71

Seven of 9 indicators are NEGATIVE
Thur. May 18, 2000

******************Commentary*******************
May 18. Nasdaq's decline was easy to forecast May 15. The Nasdaq bubble is broken. Forget about "light volume" and "buyers strike" comments in the media, the Nasdaq daily volume today is 5.6 times higher than the Oct.19, 1987 crash. Volume is a symptom, not a cause, and does not stop plunging prices. The real cause of today's Nasdaq sell-off can be pinned to options expiration, as I mentioned May 15. Contributing was today's news the Justice Dept. wants to break up MCI Worldcom and Sprint, since trashing Microsoft (MSFT is down 42% in 2 months) is done. Glad I exited MCI WCOM calls last week with a gain in the Model Portfolio. Nasdaq stalled at 3700 2 days ago just as a popular investment house strategist renewed his very vocal buy signal. On April 17, the same man publicly recommended 90% portfolio allocation in stocks. Any investor following this absurd advice has no gains, and has enjoyed excessive risk. Do not listen to stock market media gurus' hype, many do not have advanced finance educations. To make decisions, look at Nasdaq charts, and don't fight the tape. When a broker gives you a "target price" for a recommended stock, ask the broker to explain how that "target price" is determined. You will get a blank stare. If you want to know a simple method to value a stock, please go to my Intel Review. The 5-min, 30-min, and 60-minute charts are over-sold, but expect options expiration Friday to have a negative impact on prices. Media remarks about "light volume and summer doldrums" should be ignored. Volume results from price movements, not the other way around. Oracle, Worldcom, and Dell all nosedived, breaking the short-term support, and finished down an average of 4.96% today. When the leaders go, the rest will follow, and now the bear market Nasdaq is ready to test the 3138 level. The Daily Nasdaq chart shows the index below a 20-day moving average (3720), stochastics stalled out at 43.25%/40.34%. The Weekly chart shows the index 403 points below the 20-week moving average (3942) with MACD and stochastics falling. The Nasdaq is now below all moving averages except the 20-month MA. Intel is still trading from 110 to 130 which I forecasted April 26. At 124, Intel is no bargain with a P/E ratio of 54. Its rise today is directly tied to an announcement of a stock split. Microsoft is a hold, MACD and stochastics continue to improve. Cisco's MACD and stochastics are very negative. Cisco is making a new low for the current Nasdaq bear market. CSCO still sports a P/E ratio of 156. Oracle Corp plunged today, and on May 15 I said that ORCL had a "false breakout" above its 20-day MA, and the 5-point drop today proves it. MCI Worldcom moved below support thanks to the new Justice Dept. investigation. Dell broke support today. Has anyone noticed that PC prices are starting to fall again? Dell's Asian sales and profit margins may be squeezed next quarter.
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