Steve Zito, MS Fin./BS Econ. Wharton School, HTML Writers Guild
uses 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 30 Nasdaq June 28 INDEX Market Data *EMAIL ME

NASDAQ COMPOSITE
INDEX closed 4023.20

Eight of 9 indicators are POSITIVE
Sun. July 9, 2000

******************Commentary*******************
July 9. The move over 4000 happened with strong price gains Friday. The 6 largest Nasdaq leaders averaged a 1.99% gain compared to the Composite Index 1.58% gain. Normally this shows strength, however, most of the leader gains were in only one company, Dell Computer, which rose 6.15%. The Nasdaq's over-bought condition mentioned June 22 is gone, but with daily stochastics rising at 59.46%/55.44% (down from 83.91/89.20% June 22), the Index is not over-sold, which is a technical necessity to underpin a rally. Daily Nasdaq stochastics have not improved since June 30's 56.63/60.29% as the Index rose. On the bullish side, Microsoft and Worldcom gained with improving RSI and stochastics in the past 2 weeks, while Cisco held key short-term support at 63 on improving stochastics. Yet Oracle has broken down, and Intel's light volume gap move up to 140 Friday was only on a news release Thursday of non-recurring 2Q investment gains. This cross-current of activity occurs in a trading range. My trading range forecast, accurately made May 3, will remain until the FEDERAL RESERVE lowers interest rates. In my June 30 page I suggested that the Nasdaq had to close above 4066 for 2 days in a row to revise this forecast. The Composite Index touched 4066 exactly Friday, then dropped 30 points to the close. Many technical analysts at brokerage houses are watching the 4066 level. The 5-minute Nasdaq is in over-sold condition detailed in Market Data due to the technical selling at the 4066 level. The 60-minute Nasdaq chart shows positive MACD but stochastics over-bought at 90.79/88.80%. Intel made a perfect announcement mid-week to break a series of declining tops on the daily chart since the previous move to 140. There is no way for me to forecast when Intel takes investment gains into earnings. With a P/E of 60.46, the stock should be trading with a P/E of 30. In time, it will. Microsoft's MACD, RSI and stochastics improved as I forecasted June 2, and stochastics strong at 79.99/77.88% but with resistance at 85 from investors who bought in April, call options at 3 months with strikes above 85 can be written. Cisco now has a P/E of 185.19, even more surprising, Cisco's stock price has held above support at 63 and stochastics have risen to 46.74/37.90% from June 30's 27.55/33.96%. May 15, I said Oracle's move over 80 was a "false breakout" since MACD, RSI and stochastics were negative. They remained negative until Oracle broke down in recent weeks, falling from 86 to 72 in 1 day. MCI Worldcom, P/E 30.38, is the best value of the Nasdaq leaders, mentioned April 15. The 12-day 20.5% rise shows value of low P/E's. Dell at current P/E of 78.70 is very risky. I expect Dell to see later this year a modest P/E of 38. The stock has to go down 50%! Weakness in computer chip group caused an 8% one-day plunge last week for semiconductor stocks as major brokerage cut its cyclical forecast.
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