September 16th, 2005 Issue # 18

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 All markets are now facing strong resistance (SP500 at 1245, ND100 at 1625, DOW at 10750). Double top sell signal still remains a possibility. SP500 had a set back near the moving average after retesting this year high. It may issue a double top sell signal. ND100 had also a set back to the moving average and seems to gain weakness. ND100 could still issue a double top sell signal DOW now faces a very strong resistance line at 10750. Markets facing strong resistance around year high level 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 1237.91 32.81 -3.57 3 ND100 Sell August 16 2005 1574.01 1599.44 -25.43 -8.39 2 Dow Buy August 24 2005 10435 10642 207 -37 3 SP500 Last Signal Comment Our new buy signal is ahead 33 points so far. SP500 came down near the moving average and rebounded last friday. SP500 is facing strong resistance at 1245 and can still issue a possible double top sell signal. 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 25 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 now entered what looks like the beginning of a short term downtrend. It looks weaker than our 2 other indexes. Retest of this year high might be difficult to accomplish. ND100 might issue 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 207 points with the latest buy signal. DOW faces a very strong resistence at 10750. This level has not been broken for months. What we are still looking for now is a possible double top tagging the last cycle high. It is also possible that we might have a regular sell signal (MT) on this market. 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 just completed our last SPX naked PUT sell for September 1150 with another nice profit above 2.00$ this time. I strongly suggest not to play October because this month is the most unpredictable one. See the trading signal page for more information. 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 +0.6% +1.0% Unchanged -0.06% Core PPI Unchanged +0.4% +0.1% + 0.01% Retail Sales +0.3% +1.0% 0.3% + 1.5% CPI +0.5% +0.5% +0.1% - 0.01% + 0.5% Core CPI +0.1% +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 had 2 major Economic numbers. You can find latest numbers in the table above. PPI and CPI were released for August. PPI was up +0.6% and core PPI was unchanged. CPI was up 0.5% and core CPI was up only 0.1%. Those numbers were either as expected or lower regarding the core numbers. It is suggesting that rate hikes might stop earlier when we paired that with Katrina storm effect on economy. The crude is now around 64$ down from last top of 71 which gave the market some breath. At this price it is still seriously threatening economic growth. The prime is still at 3.50. Mr. Greenspan will speak next week at the FOMC meeting. 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. We have only 1 month left 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 20.51 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