September 9th, 2005 Issue # 17

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 continues on short term rebound, retesting this year high and may not issue a double top sell signal ND100 also continues short term rebound. ND100 is also in a possible double top position DOW was able to rebound after consolidation and is also at last cycle high. All markets continued on their short term rebound unexpectedly. We are now facing a possible double top sell signal soon. Markets continues short term rebound and now faces a possible double top 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 1241.48 36.38 23.46 3 ND100 Sell August 16 2005 1574.01 1607.83 -33.82 34.71 2 Dow Buy August 24 2005 10435 10679 231 231 3 SP500 Last Signal Comment Our new buy signal is ahead 36 points so far. SP500 is near the upper band close to issue a possible double top sell signal. SP500 is now testing this year high (1245). The short term rebound continued. The short term downtrend is now resolved. So what we are looking for now is how testing year high of 1245 will end up. So stay tuned this week for a possible double top sell signal. We just completed our third cycle this year. We seems to have now a very solid support at 1200. ND100 Last Signal Comment We had our last sell signal on August 16 2005. We are now behind 34 points. Same thing happened with ND100 as with SP500 at the beginning of july. We missed the buy signal by about 5 points. What I will do in the future is simple. When we will have 2 markets with a buy signal we will automaticly issue one for the third one. ND100 has broken it's short term downtrend. We are still looking for a retest of this year high and last cycle high at 1625 and a possible double top like all other markets. Stay tuned for any news with this market. We can consider that our next support is at 1500. DOW Last Signal Comment We had a new buy signal on august 24. So far we are ahead 230 points with the latest buy signal. The DOW broke above it's consolidation level of 10400 and reached the upper band this week. What we are looking for now is a possible double top tagging the last cycle high. So stay tuned for any possible sell signal. We had so far already 3 completed cycles this year. It seems that we have a good support between 10300 and 10400(see graphic below). Special Option Strategy Update We are now 1 week away from expiration with our last SPX naked PUT sell for September 1150 now worth 0.25$. We can expect another nice profit with this trade. Always remember that you need between 11,000 and 15,000 USD margin for each contract. Economic Current Conditions Table of Economic Numbers Economic Info August 2005 July 2005 June 2005 May 2005 Apr 2005 PPI +1.0% Unchanged -0.06% Core PPI +0.4% +0.1% + 0.01% Retail Sales +0.3% +1.0% 0.3% + 1.5% CPI +0.5% +0.1% - 0.01% + 0.5% Core CPI +0.1% +0.1% + 0.01% Unchanged Housing Starts 2.042M 2.045M + 0.02% Building Permits 2.167 Millions 2.132 Millions 2.11 Millions 2.15 Millions Employment 169,000 242,000 166,000 104,000(revised) 275,000 Durable Goods Orders -4.9% +1.5% + 6.4%(revised) Durable Goods Excluding Transportation -3.2% +2.6% +0.9%(revised) New Homes Sales +6% + 2.1% Existing Homes Sales 7.16 Millions 7.35 Millions ISM Index(Manufacturing) 53.6% 56.6% 53.8% 51.4% ISM Services 60.5% 62.2% Factory Orders -1.9% +0.9% +0.7% GDP(Gross Domestic Product) Numbers 2nd Quarter 2005 1st Quarter 2005 4th Quarter 2004 3.3% 3.8%(revised) 3.5% Inflation Numbers 2nd Quarter 2005 1st Quarter 2005 2.4% 3.1% This week we did not have any major Economic numbers. You can find latest numbers in the table above. The crude is now around 66$ down from last top of 71 which gave the market a small push. At this price it is still seriously threatening economic growth. The prime is still at 3.50. Mr. Greenspan sentence did not change about when the rate hikes will stop. Mr. Grrenspan may suspend rate hikes due to Katrina storm on New Orleans. We will know soon about that. Inflation is still threatening and we may still have at least 2 others .25 increase in september and december. Again we start to get mixed signals from the eocnomy with the slowdown in manufacturing activities and a quite low employment report for august. If we have another month like that we might see the FED to stop interest rates hikes. We should have another rate hike but after that it is not so sure. We are now half way through into the dangerous period of the year (August - Mid October). Now we have to start thinking that we did not have yet this year a strong cycle (10% or more profit in one cycle alone). This strong kind of market happen very often in the last quarter. So we should get prepared for that. May be this current buy signal on SP500 is the one, may be not. But consider that it should kick in the latest in mid october. The SP500 PE ratio is at 20.57 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