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.19 Nasdaq Sept.12 INDEX *INTEL REVIEW* EMAIL

NASDAQ COMPOSITE
INDEX closed 3741.22

Eight of 9 indicators are NEGATIVE
Mon., Sept. 25, 2000

******************Commentary*******************
Sept.25. Nasdaq lost 1.64%. Significantly the 6 largest Nasdaq leaders gave up an average of 3.68%. Not including Worldcom, these leaders plunged an average of 4.13%. Cable's CNBC announcer Tom Costello proclaimed last Friday's rebound to be an important turnaround-NOT! Today INTEL and CISCO led the leaders right back down to Friday's lows. After listening to one media analyst after another proclaim that Friday saw a major bottom, I decided to hold my INTEL PUTS (with a 540% gain on Friday alone), in expectation of further INTEL declines. Today, INTEL opened at $50, and quickly sank again, to end at $45.38 This adds another 160% to Oct. INTEL PUTS in my Model Portfolio. So much for CNBC Costello's "important Nasdaq bottom!" Based on technical analysis, Nasdaq will hit 3700 tomorrow. Daily stochastics are at an over-sold 3.87/13.20%, and I expect a 3% to 5% rally for the remainder of the week back to 3850. Big gains are coming in the most over-sold Nasdaq leaders, Oracle, Worldcom, and Microsoft, whose 25.90/16.60% stochastics are moving higher even as the stock makes new lows. Based on technical analysis, MSFT will present one terrific buying opportunity at $59, followed by an upside move to $65 resistance. The massive investment outflows from INTEL and CISCO will have to be reinvested quickly in similar types of companies. CSFB analyst C. Glavin rated INTEL a buy last week when it was over $60 with a target price of $100. I downgraded INTEL over 5 months ago (see INTEL REVIEW) with a target price of $39, based on research. Gurus come and go with every bull market, working for brokerages, their opinions are totally biased in order to generate transactions, the source of brokerage house revenues. Simply put, if they got you into INTEL at $75, now they are bailing you out of INTEL at $45, netting commissions both ways. On Sept.12 at $65, I said INTEL would drop below $50, after a week of consolidation around $62. INTEL still has a P/E of 33.69 but stochastics are over-sold at 7.03/18.02%. Look for a two-day bounce UP on the way to $39. MSFT (P/E 35.99) and CISCO (P/E 159.74) are not over-sold enough to lead rallies. CISCO has been weak after I wrote July 24 about its broadening distribution pattern since mid-April's low. ORCL looks like a buy at $78, with stochastics rising at 49.87/24.41%, and MACD positive. Likewise, WCOM has over-sold stochastics at 13.95/7.17% which have just turned upward, and with 15.50 P/E, is a great long-term investment. DELL has fallen 35.4% since I downgraded it July 14, a high 50.53 P/E ratio, and 100% buy recommendations from brokerage house analysts. On July 16, I wrote that DELL needed to drop 50% to be fairly valued. CPQ and GTW have already become "BUYS". MUEI has built a base under $12 and was added to my Model Portfolio at $11.50 Friday, to SELL at $14.
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