STOCK MARKET DIRECTION Email Edition for June 4, 2002
published by Steve Zito 6:00 AM EST June 4, 2002 all rights reserved
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Nasdaq Composite Index closed at 1562.56 on Monday, June 3, 2002
Nasdaq has fallen 135.07 (8.0%) since my last newsletter May 24, 2002.
CNBC and CNN brought out long-time bears today, with on-air interviews:
Gail Dudack, SunGard Institutional Brokerage managing research director;
UBS Paine Webber Managing Director Investment Strategist Mary Farrell.
Both are negative on the markets, despite admitting the economy is better.
Both women were negative on the markets in the middle of 1999 as well.
In fact, both are examples of highly paid inaccurate brokerage executives.
CNN was kind enough to do a "Quick Poll" for its MoneyLine viewers on
whether the plunging stock markets are more influenced by international
tensions or domestic accounting frauds. Over 74% CNN responses linked
current U.S. market declines to an investor lack of confidence in published
financial statements. No trust in long-respected audit firms (A. Andersen)
and loss of confidence in CEO's (head of Tyco resigned, El Paso treasurer
committed suicide) topped off by Lou Dobb's (CNN) daily on-air defense of
auditor Andersen as completely innocent, despite partner David Duncan's
guilty plea to obstruction of justice and a criminal trial underway in Houston.
The brokerages were quick to pour fuel on the fire, as Merrill Lynch again
downgraded the software space, sending Siebel, Sybase, and Oracle into
a downward spiral to new 2-year lows. Not surprisingly, the news that the
SEC settled with Microsoft for accounting irregularities sent that down too.
Don't expect the Bush administration to restrain Microsoft's monopoly at all.
The Bush administration is more interested in spying on your kid's PC emails.
Monday Nasdaq plunged from 1584 at 3:00 PM to close 1562 at 4:00 PM.
It is not the start of something significant. What TV announcers and stock
market newsletter writers promoting momentum and A/D lines are failing
to realize is that when the Nasdaq crashes 22 points in one hour, it is more
likely to rise the next day than to continue that type of excess fall. Imagine
if you threw a ball into the ground hard, would it be more likely to go ever
deeper, or to promptly bounce back above your head? Then you may ask,
how ever did Nasdaq manage to fall if the economy is now improving so?
Well, the economy is only improving for upper middle class with real estate.
Poor and lower middle class are saddled with credit card debt and bad jobs.
Preliminary data on numbers for Friday's release of the May employment
and non-farm payrolls was leaked Monday to Wall Street players who sold.
When 6.2% unemployment is reported June 7, big guys will already be out.
The Federal Reserve will be forced to address the ever growing jobless.
How can you make money with old information from TV financial media?
CNBC and CNN reported today that gaming stocks rose over 100% since
last September, and gold stocks supposedly are soaring on the weak dollar.
Bit late to make any money off those moves, why not tell us last October?
Because last October, CNBC was urging viewers to buy GE at $38 to $39.
The way to get ahead is analyzing group behavior and anticipating trends.
If the most important economic report of the year is due on Friday, June 7,
and stock markets in the U.S. plunge on Monday, insiders have the news.
Stochastics measure market psychology, moving averages predict trends.
Stochastic readings are so low, the markets will turn no matter the news.
When the Nasdaq breaks sharply above the 90-day MA, the bull will rule.
Expect it to happen soon in coming weeks, brokers call it the summer rally.
On a 10-day chart, Nasdaq is 1.1% below moving average resistance 1580.
RSI, MACD very negative, and stochastics fell to an extremely over-sold.
Monday, stochastics finished at 5%/6%, the very low of a stochastic range.
Short-term, Nasdaq will regain at least 50% of Monday's 53.17 point plunge.
Traders were trying to cover a chart gap from 1582 to 1636 left on May 8.
The gap was filled on Monday as Nasdaq closed at a new low for the year.
On intermediate 90-day, Nasdaq is 3.8% below its 90-day moving average
resistance 1624. Nasdaq was punished by big-time hedge funds, arbitragers.
These insiders have advance data on Friday's shocking employment report.
Intermediate RSI, MACD went negative a week ago as Nasdaq broke 1624.
This 1624 level will be the day-traders target for the next over-sold bounce.
90-day stochastics have plunged from very over-bought May 17 to 0%/16%.
Nasdaq rarely gets so far from its 90-day moving average, a rally is coming.
Two weeks of short-covering rallies were directly related to Cisco's profit.
Traders were trying to fill a chart gap from 1766 to 1798 (left on April 22).
This goal was met Wednesday, Thursday May 15, 16 as Nasdaq hit 1760.
In my last newsletter (at Nasdaq 1697), I repeated my frequent forecast that
it was now likely Nasdaq would decline again to test the May 7 low at 1580.
My readers know that I have advised 100% commitment at Nasdaq 1620.
That target was issued back in January 2002 when Nasdaq was over 1950.
Those investors with a 6-month to one-year horizon should be buying now.
Long-term Nasdaq moving average resistance is 1624. Nasdaq could now
be trying to make bottom for a 2-year Nasdaq Tech Stock Bear Market.
Short and intermediate charts never showed Nasdaq declining below 1600
but the long-term charts did. When Nasdaq makes a new Bull move, the
average weekly gains for the first three weeks will normally exceed 10%.
RSI, MACD negative, stochastics plunged to a deeply over-sold 0%/22%.
Individuals waiting to jump in, pessimism levels are indicative of a bottom.
Technical Analysis- Intel, Microsoft, Cisco, Oracle, Worldcom, Dell, Sun
Intel closed 26.62 -1.00 (-3.62%) below moving average resistance 27.80.
RSI, MACD negative, 5%/21% stochastics are forecasting downward drift.
Play Intel for a trading range upper bound at 32, with major support at 26.
Micron Technology in PC slowdown according to Lehman Bros. Dan Niles.
Another analyst who is never right, and gets paid $hundreds of thousands.
Niles appeared on CNBC Sept. 21, 2002 with Intel at 19, and was laughing.
Microsoft closed 49.42 -1.49 (-2.93%) below mov. ave. resistance 51.75.
RSI negative, MACD negative, stochastics plunged to an over-sold 3%/13%.
No one believes that Microsoft will go to 40, which is why it will very soon.
Microsoft just settled with the SEC regarding accounting manipulations that
would put another business corporation out. How? Microsoft's 600 lawyers.
Microsoft wants to monopolize Internet Services with its dot.Net initiative.
Like Sony, Nintendo, Microsoft cut X-box prices from $299 to $199 May 15
and started marketing campaign to link X-boxes to Internet. Games anyone?
Greenspan praises productivity by U.S. workers, so what about PC games?
Counting all those PC hours playing games in the office on company time?
Cisco closed 15.33 -0.45 (-2.85%) below mov. average resistance 15.95.
RSI, MACD negative, stochastics suddenly falling to an over-sold 2%/22%.
When Nasdaq made a short-term bottom on May 7, funds piled into Cisco.
All because Cisco reported it earned a paltry $0.10 a share in latest quarter.
Cisco left a huge chart gap from $13.50 to 15.15 which could be filled in June.
When funds start selling Cisco and Microsoft, that will mark the true bottom.
Oracle closed 7.32 -0.60 (-7.56%) below moving average resistance 8.20.
RSI, MACD negative, stochastics scraping the bottom at over-sold 0%/8%.
Oracle, like Microsoft, has peaked in long-term product development cycle.
In the past year, major defections by key Oracle management thinned ranks.
With this year's IT spending growth non-existent, strictly an average stock.
The only growth project at Oracle is a bid to produce the National ID Card.
Worldcom closed 1.55 -0.11 (-6.63%) below mov. aver. resistance 1.60.
RSI, MACD negative, stochastics rising from deeply over-sold to 21%/9%.
Will this be another bankruptcy? Classic case of mutual funds owning too
many shares bought 3 years ago, now dumping it, ruining survival chances.
Like Global Crossing and Metromedia FN, mutual funds selling everything.
Removed from S&P 500 Index, proof that "buy and hold" does not work.
Announced its tracking stock, MCI, will be recombined with parent in July.
Nortel joined it under $2, Lucent fell below $4, Worldcom was a customer.
Dell closed 26.18 -0.67 (-2.50%) below mov. average resistance 26.80.
RSI, MACD negative, stochastics plunging to deeply over-sold 2%/33%.
Two years ago, CNBC paraded guests daily recommending Dell over 50.
Biggest CNBC bull 2 years ago was Lehman's Dan Niles, with buy at 53.
Niles pushed Compaq at 22 a share a year ago, an expert at bad advising.
Niles downgrades were blamed for starting Nasdaq's slide Friday, May 31.
Hewlett Packard conference today Tuesday, June 4 will affect PC stocks.
Sun closed 6.61 -0.28 (-4.06%) below moving average resistance 6.85.
RSI, MACD positive, stochastics neutral to slightly over-sold at 10%/35%.
Sun makes servers for Internet infrastructure. With Bush's team in and
Clinton's ideas trashed, oil firms get the bucks, Internet dot.com is broke.
Government slapped Microsoft on wrists for monopoly, Sun gets shafted.
Still, Sun has $billion lawsuit vs. Microsoft with its 600 corporate lawyers.
Thanks for reading Stock Market Direction by Steve Zito.
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