Today is April 26, 2006

Our current signal is BUY

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

Even though the stock market indices we follow have been consolidating for weeks, we have reason to believe that soon this consolidation will be over. The AAII survey this past week showed 41% bears and 34% bulls, a level not seen since 10/28/05. You can see on the second and third chart below (NASDAQ Composite and S&P 500) the significant advance that started in October of 2005.

The first chart is of the equity put/call ratio. Despite today's advance, albeit small, the ratio jumped to the highest level since October of 2005! The green vertical lines in the chart show the days where the ratio was higher. You can see the huge advance that followed.

The second chart is of the NASDAQ Composite. The NASDAQ has been consolidating, but soon we believe it will make a break to the upside. The first indicator under the chart shows how the index is currently sitting at a neutral level. We believe that the RSI indicator will break higher to more overbought territority soon. As this happens, the NASDAQ Composite will increase as well. The second indicator is beginning to point higher to more overbought levels and the third indicator is extremely low, suggesting that volatility will soon be increasing. This increase in volatility will also bring the NASDAQ Composite to higher levels. Contrary to most technicians' beliefs, high volume triggers a change in trend, not a continuation of the current trend. We have highlighted the volume in the March decline and you can see the subsequent climb that followed. We believe the recent distribution (higher volume with a lower close) will trigger higher prices as well.

The last chart is of the S&P 500. The index has formed an inverted head and shoulder formation. Both the head and shoulders are shown on the chart. The S&P 500 has been unable to have a sustained break above 1310, but this will soon change. The chart pattern is very constructive, and we would expect a sustained break above the 1310 area by early next week, if not in the next two days.

We believe that patience will soon payoff. The stock market should be starting another upmove before next week's commentary.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC