STOCK MARKET DIRECTION EMAIL NEWSLETTER - © April 30, 2004
STOCK MARKET DIRECTION by Steve Zito Financial Newsletter Service
Technical Indicator Analysis of the Dow and Nasdaq Composite Index
Redistribution only with permission of writer webmaster Steve Zito.
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STOCK MARKET DIRECTION by Steve Zito Newsletter for Friday, April 30, 2004
New poll shows Americans would rather have MORE money than MORE great sex
Click for, No Sex in the City http://www.kron4.com/Global/story.asp?S=1824758
This change only came about after Bill Clinton left office, any coincidence?
In this issue, five good reasons for the stock market to turn around, go up.
Information in this letter is based on prices from Thursday, April 29, 2004
Dow Jones Industrial Average
---------------------------------------- 10,272.27 -70.33 (-0.68%)
Nasdaq Composite Index
----------------------------------------- 1,958.78 -30.76 (-1.55%)
Standard and Poors 500 Index
----------------------------------------- 1,113.89 - 8.52 (-0.76%)
10-Year Note yield
-------------------------------------------- 4.540% +0.073
DOW JONES INDUSTRIAL AVERAGE analysis:
The Dow Industrial Average closed 10,272.27 -70.33 at 1.1% under Thursday's
short-term moving average, which had drifted sideways for 16 trading days.
The 7-day moving average is lowest since April 2, before a siege of Fallujah.
Is the U.S. military trouble the cause of the stock market's mediocre April?
The TV media would have viewers believe it. CNN's resident no-brainer today,
Christine Romans, told Lou Dobbs she is worried the down days are accompanied
by heavy volume, and up days have light volume. Hope it keeps her up at nights.
I have said, for one share sold there is one share bought, volume is irrelevant.
For example, in 1987, from January to August the Dow went from 1950 to 2744.
The trading volume in 1987 was 1/10 what it is today. Have to consider that
move in the Dow in 1987 as suspect, because the volume then was 1/10 of what
the volume in the Dow was from Dow 6300 to 11,700. So much for volume theory.
In fact, the Dow's rise in 1987 was the greatest money maker in U.S. history.
On light volume relative to now. Today, companies have too many shares issued.
Stochastics were overbought at 81%/80% Tuesday prior to 2 days of heavy loss.
A drop was expected by me. I wrote that specialists like to take stocks down
before the month ends, so they can load up on inventory. For every share sold,
there is a NYSE specialist buying it to create liquidity and make a market go.
Since the specialists like to sell their inventory at much higher stock prices,
what does a rational investor expect specialists to do Friday into next week?
Find reasons to advance stocks, any reason at all. I can think of 5 good ones.
First, Dow stochastics went from 22%/55% to 14%/38%. Oversold markets are more
likely to RISE than to continue falling. It's not a guarantee. It's a tendency.
Heavy selling causes falling prices, lower prices increase demand for stocks.
Secondly, CBS News opinion polls released late Wednesday show Kerry and Bush
tied at 50% for who will get Presidential votes. Unless Nader is counted too,
and with Ralph Nader, Bush beats Kerry by 4% with Nader getting 5% of America.
I have written before, the market wants certainty. Once Bush slides under 50%
it will be more certain a Bush-Cheney dog-and-pony show won't be seen in 2005.
I wrote incorrectly Thursday Bush and Cheney would take their two-man show to
Capitol Hill. Bush and Cheney testified for 3 hours in the Bush's Oval Office.
Afterwards, Bush appeared on the White House entrance and badgered reporters.
The stock market wants to know who will win, not guess about it for 6 months.
The way Bush treated reporters Thursday, his nosedive in polls, spell Kerry.
Third, the U.S. military Field Marshals appeared to have brokered a deal with
1,100 former generals of the Saddam regime to take over security in Fallujah
so the Marines can pull out and save those 500-pound bombs for softer targets.
Iraq's deal was announced late Thursday, and should give the markets a respite
from endless bad news out of Iraq. ABC and Nightline wanted to air the entire
list of names of 732 Americans killed in Iraq since "Mission Accomplished" and
rightwing networks controlling local TV stations in 7 U.S. cities banned ABC.
Latest polls in Iraq show a majority of Iraqis asking for the U.S. to pull out.
Personally, Mr. Bush is macho, and not the type to pull out once he's gone in.
Mr. Bush has an answer for disgruntled Iraqis who are occupied, "Bring it on."
Fourth, Kerry finally came out swinging in Philadelphia, City of Brotherly Love,
blasting Bush for ignoring threats on American soil in favor of bankrolling Iraq.
Democrats were angry Kerry was keeping quiet while dropping in the opinion polls.
Last few months, when Kerry has fallen noticeably in the polls, stocks declined.
Each time, Kerry would reappear after a week with a story, and stocks rebounded.
Since Kerry finally came out of the nice guy closet on Thursday, stocks may rally.
At least it shows he is still trying to win, and not just going through motions.
If only Kerry would play like the 7th game of the World Series, like he is Boston.
Then if he loses an election, we can call his loss "Curse of being from Beantown."
Fifth, see Nasdaq analysis below, Google is going public in a $2.7 billion IPO.
The drooling greed that conjures up in the mind of new issue lovers is enough to
turn any market from swiss cheese into hard sausage, and Google's IPO euphoria
should spread to the overnight stock index futures including the Dow as I write.
Google's IPO claims to offer everyone a shot at bidding for it in Dutch Auction.
Summary, Dow is oversold and due for a bounce. The election is becoming clearer
as Bush drops below 50% approval rating. The military is brokering truce in Iraq.
Kerry is raising his voice to be heard, Bush is testifying in private in secret.
The more Bush hides in the Oval Office, the more likely he is a one-term wonder.
The market does not care who wins, only how soon it finds out, like Bush at 39%.
If you don't believe it, review the chart of the Dow the day Bush took office,
and 1 year later, and 2 years later, and try to find a similar historical drop.
NASDAQ COMPOSITE INDEX analysis:
Nasdaq Composite closed 1,958.78 -30.76 at 2.2% below a sliding short-term trend.
Correction to when I said it closed "above" Nasdaq's moving average on Wednesday,
it did not. Wednesday, Nasdaq closed 1.5% "below" its short-term moving average.
Stochastics weakened from 2%/49% to 10%/23% and are still oversold and yesterday,
I had mentioned that Tuesday's stochastics were forecasting a current weakness.
It should end on Friday with end-of-month mutual funds throwing cash into tech.
Why buy tech now, when the whole spectrum of tech stocks is getting trashed?
A new Google IPO should boost Nasdaq tremendously, the best IPO since 1996.
Google goes public, see http://biz.yahoo.com/rb/040429/tech_google_21.html
Or go SEARCH. That is what Google does, with the IPO money, Google will rival
competitor Yahoo by offering email (Google Mail) and soon, jobs and personals.
The SEARCH that Google provides have made the Library Dewey Decimal obsolete.
Unfortunately, the jobs that Google creates have made over-40 males obsolete.
Don't believe me? Ask Jeeves, Look Smart. Get Excite about the MSN Butterfly.
Thanks for reading this edition of Stock Market Direction by Steve Zito.
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