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 July 9 Nasdaq June 30 INDEX Market Data *EMAIL ME

NASDAQ COMPOSITE
INDEX closed 4246.18

Eight of 9 indicators are POSITIVE
Sun. July 16, 2000

******************Commentary*******************
July 16. The Nasdaq Composite Index closed above key technical resistance at 4066. My trading range forecast made May 3 is revised with the upper range raised from 4066 to 4395. In my June 30 page, I stated that Nasdaq had to close above 4066 to revise my trading range forecast. The Composite Index soared 7.3% after the breakout, as many technical analysts at brokerage houses were watching 4066. Daily Nasdaq chart stochastics at 86.33/74.59% have improved since a June 30 reading of 56.63/60.29%. The six largest-cap Nasdaq stocks averaged a 1.38% gain Friday compared to the Composite Index 1.7% gain. Normally this shows weakness, when the leaders move less than the Index. After all, Nasdaq's Big Six comprise over 20% of the Index. A weekly gain of 2.45% for the Big Six is worrisome in comparison to the Nasdaq Comp's 5.5% gain on the week. What is happening? Heavy overhead supply selling in Microsoft at 84 and Oracle at 80. The other members of the Big Six averaged a 4.5% gain on the week. With most semiconductors making new highs and PC makers surging smartly, these software stocks may play "catch up". I expect a surge in Nasdaq up to options expiration, Fri. July 21, with a brief midweek pullback as detailed in Market Data, then a MAJOR CORRECTION after options expiration. The Nasdaq's over-bought condition from June 22 is returning, with daily stochastics rising to 86.33%/74.59% (compared to a falling 83.91/89.20%). The 15-minute, 30-minute, 60-minute, and daily Nasdaq charts have been in over-bought condition for 2 days (Market Data). The 5-week Nasdaq moving average (MA) crossed the 20-week MA to confirm the breakout above 4066, with a buy signal from the positive turn in weekly MACD. On the bearish side Intel's light volume move up to 146 looks like a short squeeze on the July 6 news of non-recurring 2Q investment gains. With a P/E of 63.20 the stock is double its normal P/E of 30. Microsoft's MACD, RSI, and stochastics are falling since it hit resistance at 84 July 7 from selling by investors who bought near 84 in April looking to get out. Cisco has a P/E of 193.34, and stochastics have risen to 69.67/55.40% from 27.55/33.96% on June 30. May 15, I said Oracle's move over 80 was a "false breakout" since MACD, RSI and stochastics were then negative. They remained negative until Oracle fell from 86 to 72 one day a few weeks ago. Stochastics have just turned higher. I will add a July 80 call option position to the Model Portfolio. MCI Worldcom, P/E 31.75, is the best value of the leaders. The 17-day 29.3% WCOM rise proves the value of low P/E investing. Dell at its P/E of 82.39 is very risky. I expect Dell to sell down to a modest P/E of 38. The stock has to decline over 50%! Weakness in Internet device sales forced Dell out of that market after only 1/2 year, a dismal failure!
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