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 24 Nasdaq July 20 INDEX MUTUAL FUNDS EMAIL

NASDAQ COMPOSITE
INDEX closed 3663.00

Eight of 9 indicators are NEGATIVE
Sun. July 30, 2000

******************Commentary*******************
July 30. The cable TV media analysts are convinced that the summer rally died because Nasdaq closed below its 200-day moving average. Nonsense! Friday's 5% plunge was the direct result of a publicized reversal from "buy" to "sell" on Thursday night by a simple-minded DLJ strategist (the same one who recommended 90% in technology stocks portfolio allocation on April 17). My trading range forecast on July 16 still has an upper limit at 4395 and a lower boundary at 3190. Two weeks ago the Nasdaq Index soared 7.3% after closing over 4066 a common resistance mark watched by technical analysts, and within days, quickly reversed. In a similar fashion, expect a deeply over-sold Nasdaq to turn around and move sharply higher Monday. On July 16 I forecasted a severe drop in Nasdaq after July 21 options expiration, led by Intel, Cisco, and Dell, stocks which averaged a 5.79% clipping on Friday. All three have similar plunging chart patterns, and absurd price/earnings ratios. I have said the best value of the six largest is Microsoft, which rose 2.8% while Nasdaq dropped 8.2% Thursday and Friday. Nasdaq daily stochastic levels (73.59/78.89% on July 20) have plunged to a rock-bottom 16.82/33.49%, and the 15-, 30-, and 60-min. stochastics are all over-sold. Look for a Nasdaq bounce as over-sold rallies will occur often in August. It is significant that Microsoft has been rising for 2 days, after heavy selling from July 7 took 20% off its price. Microsoft is deeply over-sold with daily stochastics at 13.44/13.73%. I added MSFT to the Model Stock Portfolio at 69, but I was stopped out of WCOM with a 6% loss at 41 1/4. WCOM remains a strong buy with a P/E of 23.63, and daily stochastics 15.61/32.20%, but I have a similar position in Sprint Group FON Sept 50 calls in the Model Stock Options Portfolio. The four stocks to avoid I listed on July 24 averaged a 5.24% drop on Friday! Cisco has a P/E of 177.93 and stochastics at 55.78/69.86% are plunging. Oracle closed below a tight 73 to 78 channel range on Friday. Daily stochastics stay neutral at 39.69/47.29%. Dell was a basket case last week, suffering an 11.34% drop Monday, and another 3.98% on Friday. Prime supplier to DELL, Intel closed below support at 138 3/8 on Monday, and nose-dived 8 points on Friday, yet still has a P/E of 47.89. The options expiration sell-off in Nasdaq I correctly forecasted July 16 was entirely due to the options/equity arbitrage occurring in the middle of every month. Nasdaq's over-bought condition peaked June 22 and peaked again at options expiration July 20. In just nine trading days, the Nasdaq has dropped 14.5% creating a buying opportunity. For 35 stocks to own, visit my new MODEL MUTUAL FUNDS designed to beat the market!
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