Commentary from February 22, 2006

Tonight we will start with a question: how can I make use of both your mid-term and long-term system?

You have a few options.

1) As we have mentioned before, you can use our long-term system for your 401k and/or IRA and our mid-term system for your independent account.

2) If you do not have a 401k or IRA you could trade funds with our long-term system and ETFs with our mid-term system. (We would discourage you from trading funds with our mid-term system, as you will receive the closing price, not the opening price like with ETFs, and this could have a negative effect on your results. Even though it is best to trade the long-term system with ETFs as well, as the long-term system only trades an average of two to three times a year, receiving the closing price a few times a year should not have a huge impact on your portfolio).

3) Trade ETFs with both and have the trades cancel each other out if necessary. Meaning, if we have a long-term signal of buy and a mid-term signal of sell, sit in cash until the next time our signals coincide.

4) You can have two separate independent trading accounts. One for our long-term system and one for our mid-term system. This way you could trade ETFs with both systems and not be confused with how to allocate your money. Decide what percentage you would like to allocate toward each system and designate one account for our mid-term system and one for our long-term system.


Commentary

The stock market is gaining strength and starting its next move higher. The three charts we are looking at tonight are of the percentage of NASDAQ stocks above their 200 day moving average, a 20 day exponential moving average of the put/call ratio, and a 20 day exponential moving average of the NASDAQ highs divided by the NASDAQ lows. The last significant top in the stock market was at the end of January 2004. By looking at these three charts you can see how extreme the readings were at this time. Currently, the indicators are far from being long-term overbought. The market indicators we follow became extremely overbought before the top happened at the end of January 2004, so we shouldn't assume that the next market top will be as extreme, but we can assume that the indicators will be much more overbought than they are now. The first and third indicators signal overbought conditions with high readings and the second indicator, the put/call ratio, triggers overbought conditions with low readings.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC