August 26th, 2005 Issue # 15

Written By Richard Bastien
Author of Index Trading System
© copywright besttradingsystems.com

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The Index Trading Weekly Newsletter Is now accessible directly from an RSS Feed. If you have a My Yahoo account or an My Msn account go to the Weekly newsletter page to register and you will be advised immediately when changes occur on the site either with trading signals, weekly newsletter or any other changes on the site. You can also create a new entry in an RSS reader. Click Here to register for RSS Feed Markets brief SP500 just gave us a new buy signal and is near to be oversold ND100 continues to weaken and now in a short term downtrend and near to give us a buy signal DOW gave us a new buy signal earlier this week and is also oversold August continues to be sluggish and all markets are in a short term downtrend now lasting for 4 weeks. Short term rebound is expected any time soon Markets near being oversold Last trades update Index Market Last signal Entry date Entry Price Current Price Win / Loss Weekly Change # cycles completed SP500 Buy August 26th 2005 1205.10 1205.10 0.00 -14.61 2 ND100 Sell August 16 2005 1574.01 1558.84 15.17 -14.88 1 Dow Buy August 24 2005 10537 10435 -38 -162 3 SP500 Last Signal Comment We closed our long lasting sell signal at a loss of 7 points. We are now on a new buy signal given last friday so we are break even for now. We are now in a short term downtrend lasting 4 weeks at this point. SP500 is now right at the lower band and is almost oversold with an RSI of 37. We can now expect a short term rebound somewhere next week but it is possible SP500 might fall a bit lower before that. We still have a solid support between 1140 and 1160. We just completed our third cycle this year and we are now waiting for the next buy signal to start a new one. ND100 Last Signal Comment We had our last sell signal on August 16 2005. We are now ahead 15 points with this new trade. ND100 continues on a short term downtrend now lasting 4 weeks. We are now looking for a buy signal which could occur soon around 1550 mark. Stay tuned for any new signal with this market. This market is almost oversold yet with an RSI reading of 35. It is also very important to mention that we have a solid support just above 1400. We are having our 2nd cycle in this market for this year. DOW Last Signal Comment We had a new buy signal this week on august 24 locking another small 1% profit over the last sell signal. So far we are behind 38 points with the latest buy signal. The DOW is now oversold and right at the lower band. We can expect the DOW to issue a short term rebound any time this week. We had so far already 3 completed cycles this year. It seems that we have a good support at 10100 (see graphic below). Special Option Strategy Update We are 3 weeks away from expiration with our last SPX naked PUT sell for September 1150 now worth 2.05$ Always remember that you need between 11,000 and 15,000 USD margin for each contract. Economic Current Conditions Table of Economic Numbers Economic Info July 2005 June 2005 May 2005 Apr 2005 PPI +1.0% Unchanged -0.06% Core PPI +0.4% +0.1% + 0.01% Retail Sales +0.3% +1.0% 0.3% + 1.5% CPI +0.5% +0.1% - 0.01% + 0.5% Core CPI +0.1% +0.1% + 0.01% Unchanged Housing Starts 2.042M 2.045M + 0.02% Building Permits 2.167 Millions 2.132 Millions 2.11 Millions 2.15 Millions Employment 207,000 166,000 104,000(revised) 275,000 Durable Goods Orders -4.9% +1.5% + 6.4%(revised) Durable Goods Excluding Transportation -3.2% +2.6% +0.9%(revised) New Homes Sales +6% + 2.1% Existing Homes Sales 7.16 Millions 7.35 Millions ISM Index(Manufacturing) 56.5% 53.8% 51.4% ISM Services 60.5% 62.2% Factory Orders +1.0% +2.9% +0.7% GDP(Gross Domestic Product) Numbers 2nd Quarter 2005 1st Quarter 2005 4th Quarter 2004 3.4% 3.8%(revised) 3.5% Inflation Numbers 2nd Quarter 2005 1st Quarter 2005 2.4% 3.1% This week we had durable goods orders and Real estate market Economic numbers. You can find those numbers in the table above. Durable goods orders felt sharply (-4.9%) while the real estate market continues to be strong. We have to pay attention to the durable goods orders showing what could be the beginning of a slowdown in consumers confidence. The crude is now above 68$ seriously threatening economic growth. Our last 2 weeks fear that higher energy cost would be shifted on consumers seems to materialize itself. The markets now start to react to that negatively. The prime is now at 3.50. Mr. Greenspan sentence did not change about when the rate hikes will stop. We will have for sure at least 2 others .25 increase in september and december. Experts now thinks it will get up as high as 4.50% before we can see a pause on rate hikes. We continue into the dangerous period of the year (August - Mid October) with august almost over and very bad so far. We can't expect a continuation in markets uptrend like we had in july. The SP500 PE ratio is at 19.97 which is still considered low. Remember that when the last major economic cycle that started in march 2003 the PE ratio was at around 16. So we are at the low end. The markets are way from being overbought and we should not expect any major bear market for the time being.

This is it for this week and continue to monitor any signal change on the Index Trading Signals page