Today is June 14, 2006

Our current signal is BUY

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

Currently, the NASDAQ Composite sits about 12%-13% below its recent peak in April. If we are right that this is only a correction in a bull market, the NASDAQ will only fall a few percent more at most. If the NASDAQ does close over 15% lower than its peak in April, we will know that the long-term downtrend has been down for the last two months and that we would have ideally changed our signal to sell in April.

Unfortunately corrections are apart of long-term investing, even if you are market timing. We have written various articles on corrections in the past and have always commented that a long-term subscriber should expect 15% corrections from time to time. Within the coming weeks, if not days, we will know for sure if this is only a normal correction within a long-term uptrend or if a long-term downtrend started in April. Our work strongly suggests the former, but only time will tell.

The volume has been enormous during this decline. In fact, the volume has not been this large in the NASDAQ since July and October of 2002 (the bottom of the bear market). What does this mean? If this is indeed only a correction, there will most likely be an enormous surge higher in the coming weeks and months.

Below are the same three charts that we showed last week in our commentary. You can see how the NASDAQ Composite has broken through our first support line and is just above the second. If this is only a correction, the NASDAQ will most likely be able to stay above this line. The second chart is of the S&P 500. You can see how the index has already fallen into the first support line and the second line is not much further down. We would expect the S&P 500 to be able to stay above this line if this is only a correction. The final chart is of the Russell 2000. The index has broken the first support line and is half-way to the second. Again, if this is a correction, we would expect the index to be able to stay above this line.

The last few months have not been easy, but we are most likely nearing the end. If our long-term uptrend has been incorrect, we will know very soon. Likewise, if we are correct that the trend remains up, the market will need to find its bottom within a few percent.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC