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 18 DOW May 11 INDEX Market Data INTEL Review

NASDAQ COMPOSITE
INDEX closed 3364.21

Eight of 9 indicators are NEGATIVE
Mon. May 22, 2000

******************Commentary*******************
May 22. Nasdaq's plunge was forecasted May 16. The Nasdaq bubble has burst. The cause of Friday's drop can be pinned to May options expiration, a story that I had on May 15 while everyone else focused on the Federal Reserve meeting. Contributing to today's brutal bear market breakdown were key leaders Oracle and Cisco Systems. Rumor has it that the Justice Dept. wants to break up Cisco. When Cisco last traded above 60, I recommended a target buy price of 48. Seemed unrealistic then. Cisco hit 50 today at the low. When Cisco trades under 48, I will add 6-month call options to the Model Portfolio. Nasdaq stalled at 3700 a week ago just as the media proclaimed the Composite Index had successfully tested the April 17 lows at 3300. Rule One: Daily price movements are "independent" events, and the fact that an Index bounces off a certain level does not guarantee that prices will continue to rise.. Forget about "light volume" comments on down days, and "heavy volume" on up days, the Nasdaq daily volume today is 5 to 6 times higher than the Oct. 19, 1987 crash day. Volume is a result of stock transactions, not a cause of trades, and does not affect price. To make decisions, determine the value of the stocks. A simple method to value a stock is in my Intel Review. Five-minute and 15-minute charts are over-bought, but the 30-minute and 60-minute charts still have room to go higher after today's low at 3172 (20-month moving average at 3146). The rally will go on for a half-day. The 6 largest Nasdaq stocks nosedived, but rebounded late to pare steep losses, still all are now below their 20-day moving averages. When the leaders go, the rest will follow. The Daily Nasdaq chart shows the index below the 20-day MA (3633), stochastics turned negative again- 29.48%/34.46%. The Weekly chart shows the index 553 points below the 20-week MA (3917) with MACD and stochastics falling rapidly. Intel is still trading where I forecasted April 26. Intel MACD and stochastics are neutral pending an upcoming stock split. Microsoft is a hold, MACD and stochastics are improving. Cisco's MACD and stochastics are the most negative of this year, over-sold. Cisco is making a new low, it's a buy under 48. Oracle Corp plunged again, on May 15 I said Oracle's move to 79 1/2 was a "false breakout" and the close at 67 today proves it. MACD, RSI and stochastics are negative, but not over-sold. MCI Worldcom moved 4 points below resistance due to Justice Dept. anti-merger news. MACD, RSI and stochastics are negative, but very oversold. All telecom stocks have been getting battered. Dell failed to regain strength and now over 3 points below resistance. PC prices are falling again. Some models are priced 15% lower in a month. Dell's Asian sales (Japan recession) and profit margins (lower average selling prices) could be hit. Dell should be trading at a price to earnings ratio of 38, which is a price of $24.
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