How to share iMac WiFi Internet connection without a router

I would like to know if I can link my iPod Touch (new one) to my iMac so that share my internet connection via wi-fi via Airport at home without a router.
I have tried to like my ipod touch to iMac by turning airport and setting up a new network, the ipod touch is able to pick up the wireless signal of my iMac ant the Airport status bar shows an arrow out which mean that airport is sending signal out but for some reason when I try to use Safari or Mail in get the following error message "cannot Open Page Page, Safari cannot open the page because it is not connected to the internet"
Also when when scanning for wireless signal with my iMac I am able to pickup my neighbours wireless signal while my iPod Touch is only able to pickup my iMac airport wireless signal.
What I am missing ?

1. Open System Preferences
2. Go to 'Sharing'
3. Click on 'Internet Sharing' (leave the box unchecked for now).
4. From 'Share your connection from' choose 'Built-in Ethernet'
5. From 'To computers using' check the 'Airport' box
6. Open 'AirPort Options' (bottom right), name the network. (Once it all works, go back and assign a password).
7. Now, check 'Internet Sharing' box and turn on AirPort. The AirPort sign on the iMac menu should turn into an arrow.

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