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 30 Nasdaq July 24 INDEX *INTEL REVIEW* EMAIL

NASDAQ COMPOSITE
INDEX closed 3787.36

Three of 9 indicators are POSITIVE
Sun. August 6, 2000

******************Commentary*******************
August 6. The cable TV media analysts are telling us that Nasdaq's struggle back to its 200-day moving average is short-lived because "volume is light". Nonsense! Nasdaq recovered 3.39% last week because it was over-sold, correctly forecasted in my July 30 page. The over-sold bounce has absolutely nothing to do with the trading volume. We win or lose money when prices move, whether one share or 100 million shares are traded. Why was Nasdaq over-sold? Nasdaq dropped 5% in one day July 28, the direct result of an announced reversal from "buy" to "sell" the night before by a double-talking DLJ strategist (the same guru who recommended 90% technology stocks in a recommended portfolio allocation on April 17). Bargain hunting came in last week by portfolio managers, who had built up cash July 28 in anticipation of fund redemptions. When the market rallied on Monday, the fear of fund redemptions vanished. July 16, I forecasted a severe drop in Nasdaq after July 21 options expiration, led by Intel, Cisco and Dell, stocks that had poor chart patterns and absurd price/earnings ratios. In these uncertain market days, I have said the best value of the Big Six is Microsoft, which fell 20% a few weeks before Nasdaq's 15% plunge from 4284. Microsoft has firmed up, and will soon begin a share buy-back. Is the firmness in MSFT evidence of a Nasdaq bottom? Maybe. Nasdaq daily stochastic levels (73.59/78.89% on July 20) plunged to a rock-bottom 16.82/33.49% by July 28, and are now rising at 27.10/22.73%. However, a look at the Nasdaq daily chart shows that the Nasdaq is essentially unchanged since June 1. It never became over-sold enough to sustain a rally for more than a few weeks, and RSI at 34.02 is still short of capitulation levels seen at the April 17/May 24 bottoms. The 15-, 30-, and 60-min. stochastics are neutral, with the 60-min. approaching over-bought. Look for resistance at 3882, the 20-day moving average. Microsoft is still over-sold with daily stochastics at 21.16/18.05% and finally rising. I added MSFT to the Model Stock Portfolio at 69. Oracle gapped open at 78 5/16 above a 73-78 channel range on Friday, gaining 12.7% on the week. Daily stochastics at 64.02/50.18% support the break-out. WorldCOM remains good value with P/E of 22 and daily stochastics 16.05/16.95%. The over-valued stocks to avoid I listed on July 24, Intel, Cisco, Dell averaged a 1.43% drop last week vs. Nasdaq 3.39% gain! Intel has a high P/E of 46, but daily stochastics are over-sold at 19.20/19.73%. Cisco has a P/E of 185.72, neutral daily stochastics at 44.71/43.48% not supportive. Dell suffered a 22% loss in just 3 weeks. Dell daily stochastics at 17.04/16.37% are over-sold. Visit my great MODEL MUTUAL FUNDS, portfolios designed to beat the market!
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