Today is May 17, 2006

Our current signal is BUY

This signal was initiated after the close on June 27, 2005

Even though the recent decline has been hard on our portfolios, there is no reason to believe that the current long-term uptrend is no longer intact. Tonight we are going to be looking at the current correction, along with the two other market corrections since August of 2004.

All four charts have three sets of Fibonacci retracements placed on top of them. Our goal is to compare the current correction with the two that preceded.

The first chart is of the NASDAQ Composite. You can see how the first correction retraced over 61.8% before the index rebounded, the second correction corrected exactly 61.8%, and the current correction is currently between the 50% and 61.8% retracements. This suggests that the current pullback has been less than the two that preceded and that the NASDAQ Composite may fall a bit further before the correction is finished.

The second chart is of QQQQ. You can see how the first correction was over a 61.8% retracement, just like the NASDAQ Composite, the second ended exactly at the 50% retracement, and the current correction has now broken the 61.8% retracement. This suggests that if the long-term trend is still up, that QQQQ should be bottoming very soon, if it hasn't already.

The next chart is of the Russell 2000. The previous two corrections were at 61.8% exactly and the current correction is now sitting on the 38.2% retracement line. If the Russell 2000 does not find its final support at this line, we would expect the index to fall only a little further.

The last chart is of the S&P 500. The first correction was in between the 50% and 61.8% retracements, the second correction was beyond the 61.8% correction, and currently we are sitting at the 38.2% retracement, just like with the Russell 2000. We do expect the S&P 500 to find support here as well, but if the index does not, it should only fall a little further.

Unfortunately, corrections are a part of the stock market and when volatility is low, we feel them even more. Regardless, we believe the long-term trend is still up and if the bottom did not happen today, the bottom should be right around the corner.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC