Steve Zito (MS Finance) is a member of the HTML Writers Guild
using economic and technical analysis to forecast the 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 June 2 DOW June 1 INDEX *Market Data* INTEL Review

NASDAQ COMPOSITE
INDEX closed 3860.56

Seven of 9 indicators are POSITIVE
Sun. June 18, 2000

******************Commentary*******************
June 18. Nasdaq has changed very little while I have been away since my last update on Friday, June 2. The root cause of the two week sideways activity lies in the latest economic data revealing conflicting trends in the economy. No one seems to know if the economy is slowing down. Key leaders Microsoft, Cisco, Oracle, and Dell have performed well in the past two weeks, offsetting weakness in Intel and Worldcom. Intel is locked firmly in its trading range between 110 and 130, but I closed out gains in the July 110 Intel put option position in the Model Portfolio when I went away. Recent trading on Nasdaq resembles classic distribution. Expect a near-term move to 3500. The 30-minute and 60-minute charts show neither weakness nor strength (see Market Data). While most of the Nasdaq charts for various time periods are now above their 20-period moving averages, the rally exhibits the characteristics of "short-covering." Intel is down 8 points from my last update, trading back into the range I forecasted April 26. Intel's MACD and stochastics have turned negative in the past 2 weeks. The stock sports a P/E of 54.71, well above historical valuations, and 60% above the high end of Intel's price to earnings level in the last ten years. Microsoft remains a hold, its MACD and stochastics continue to improve, which I had forecasted in my June 2 page. Cisco has surprisingly moved far above 48, the level at which the stock can be bought safely. Cisco now has a P/E of 192.10, and wide-eyed gurus are still recommending the stock. Cisco's stochastics at 92.88%/87.36% show the stock in very overbought condition, so while the chart looks great and its RSI has been trending up nicely, expect a sudden pullback to support at 63. If the Justice Dept. jumps on Cisco, the stock will be back to 50. Oracle Corp is trading above 80 again, on May 15 I said Oracle's move to 80 was a "false breakout" and at that time it was, since MACD, RSI and stochastics were negative. This time the stats are mixed, with MACD positive and the stochastics negative. The upside is not confirmed, especially with the price to earnings at 127.92. MCI Worldcom, P/E 26, is the best value of the Nasdaq leaders, correctly forecasted May 3. WCOM is showing temporary weakness on fears its merger with Sprint will be blocked. When the merger is approved by the Justice Dept, expect WCOM to move sharply to the upside. Dell has moved 2 points above resistance. PC prices have been falling since Spring. Dell's lack of agreement with AMD for alternative sourcing in microprocessor supply, slowing sales in Japan (recession in Asia), and lower profit margins from lower average selling prices are having an effect, yet investors are flooding into the stock without fear of the current price to earnings ratio of 73.75. Expect Dell to trade at a realistic price to earnings ratio 38, translates to a $24 stock price.
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