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 Sept.7 Nasdaq Aug.20 INDEX *INTEL REVIEW* EMAIL

NASDAQ COMPOSITE
INDEX closed 3849.51

Eight of 9 indicators are NEGATIVE
Tue., Sept. 12, 2000

******************Commentary*******************
Sept.12. Nasdaq stays problematic as investors cautiously anticipate the usual Sept./October correction. This year's rise in interest rates, oil prices, and resulting economic slowdown have a great impact on industrial stocks yet it is the technology-laden Nasdaq that is leading the spiral downward. Value-oriented strategists (e.g. G. Dudack) have suddenly popped up on cable TV touting "old economy value stocks, utilities, and financials." What they don't tell you is that in nasty bear markets, all stocks go down. Behind the doors of their boardrooms, these strategists are scared stiff that the great bull market of the 90's is over. The holders of Worldcom and Sprint will attest to that, they have plenty of sad tales to tell. Since the Justice Dept. broke up their merger, Sprint has plummeted 58% and Worldcom is down over 40%. Bonehead of the month, Merrill Lynch's semiconductor analyst finally recommended INTEL at $73 in August just as INTEL rose above $70 for the third time in year 2000. Since then, INTEL has plunged 14% to near-term support around $62. Highly paid tech analysts guarantee losing investment picks because they are not independent, their buy recommendations have to be approved by upper management. INTEL should continue to sell down to $50, after a week or two of serious consolidation around $62 (see my INTEL REVIEW for reasons why). INTEL has a P/E of 48.21 and plunging daily stochastics. More over-valued, CISCO has an absurd P/E of 164.46, a quadruple top at 70, falling stochastics as mentioned July 24, and an obvious broadening distribution pattern since mid-April. This stock is headed under $50. Oracle was over-bought at the end of July when daily stochastics were 83.69/85.20%. Heavy mutual fund buying in Oracle over $90 occurred last month, as many fund managers are momentum players. Too bad they are not investing their "own money." They certainly are losing their customer's money. Oracle first quarter earnings could be a miniscule $0.18 per share when reported this Thursday, Sept. 14. DELL remains a basket case since it hit $53 on July 14, falling from over-valuation, industry-high P/E ratio of 55.14, and unanimous 100% buy recommendations from brokerages. If Compaq Computer has the same annual $0.68 per share earnings as DELL, and CPQ sells at $30, or 20% less than DELL, why do analysts recommend buying DELL? Try to ask them when they make guest appearances on cable TV and take calls from viewers. On July 16, I wrote that DELL needed to drop 50% from $53 to be fairly valued. Since then, DELL fell 29% to $37.50. On the buy side, Worldcom is a great long-term value with 17.79 P/E. MSFT has been building a base under $70 and remains over-sold as measured by 9.75/15.63% stochastics. Unfortunately, Steve Ballmer's management of the firm is so myopic that MSFT may never recover.
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