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 22 DOW June 1 INDEX *Market Data* INTEL Review

NASDAQ COMPOSITE
INDEX closed 3813.38

Six of nine indicators are POSITIVE
Fri. June 2, 2000

******************Commentary*******************
June 2. Nasdaq's plunge last month was correctly forecasted May 16. It happened. The Nasdaq bottomed at 3042 on May 24, successfully tested at 3159 on May 30, and soared 608 points last week, capped by a 6.44% gap move to the upside on Friday, June 2. The root cause of Friday's soaring prices on the open can be pinned to economic data showing a temporary weakness in the economy. Key leaders Intel, Cisco, and Oracle all opened on gaps Friday morning, and Oracle and Cisco closed below their opening price! In fact the big six leaders on Nasdaq averaged a 3.37% gain on Friday compared to the Nasdaq Comp Index gain of 6.44%. The generals are being sold in this rally. Key leader Dell did not even participate in the move last week, and is close to a two month low, in anticipation of the possible PC price cuts I forecasted May 22. Dell is headed for $24. Intel has gapped above its recent trading range, and provides a great opportunity to enter a July 110 put option position in the Model Portfolio. Nasdaq plunged to 3042 just 2 weeks ago after the media proclaimed the 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 stock prices will continue to rise.. The trading on Nasdaq Friday is classic distribution following a gap open. Expect immediate move to 3600. The 30-minute and 60-minute charts are extremely overbought (see Market Data). Last week's rally is already over. While the time charts are now above their 20-period moving averages, except the Weekly chart, the rally exhibits all of the characteristics of "short-covering." The Nasdaq leaders, with the exception of Oracle, are not moving up as fast as the Index, a worrisome sign. Intel is trading 4 1/4 points above the range I forecasted April 26. Intel MACD and stochastics stats are positive pending the upcoming stock split. Microsoft is a hold, MACD and stochastics are steadily improving. Cisco is a buy under 48, a level recently approached. Oracle Corp soared again, on May 15 I said Oracle's move to 80 was a "false breakout" and it was, since MACD, RSI and stochastics were negative then. This time they are positive. MCI Worldcom is the best value of the Nasdaq leaders, correctly forecasted May 3. WCOM rose 5% on news Friday. Dell failed to participate last week and is still over 2 points below resistance. PC prices have been falling since March. Dell's lack of firm agreement with AMD for alternative sourcing in microprocessor supply, some slowing in Japan sales (recession in Asia), and lower profit margins (lower average selling prices) are key. Later this summer, I expect Dell to trade at a price to earnings ratio of 38, which is a stock price of $24.
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