September 23, 2005 Issue # 19

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 could not break through their respective resistance. All markets setting back near the lower band. Double top sell signal eliminated. SP500 had a set back near the lower band after retesting this year high. ND100 had also a set back under the moving average and continues to be weak. ND100 can now touch the lower band and gives us a buy signal. DOW could not break through 10750 line and completely retreated to the lower band. This is a chance again to enter this market. Markets retreating on a false cycle 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 1215.29 10.19 -22.62 3 ND100 Sell August 16 2005 1574.01 1571.75 2.26 -27.69 2 Dow Buy August 24 2005 10435 10420 -15 -37 -222 SP500 Last Signal Comment Our new buy signal is still ahead 10 points despite a sharp drop this week. We had what we call a false cycle. SP500 did not go high enough to validate a cycle or did not last long enough either. We are almost back to where our current buy signal started. SP500 came down near the lower band and rebounded a bit near the end of the week. SP500 can now retouch the lower band any time soon near 1200. This 1200 mark is our current support and if broken our next support is at 1140. So what we are looking for now is a retouch to the lower band. 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 ahead 2 points after lagging behind for the past 3 weeks. ND100 retreated under the moving average and is headed to touch the lower band. It looks weaker than our 2 other indexes. Retest of this year high failed. ND100 might issue a lower band touch buy signal around 1540. 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 now behind 15 points with the latest buy signal. DOW could not go through it's resistence at 10750 and retreated straight to the lower band. As for SP500 we had what we call a false cycle. It did not go high enough or lasted long enough to validate the current cycle. So with this market we are back to square one. In fact for those who did not move on the last signal this is your chance now. 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 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 2.009M 2.042M 2.045M + 0.02% Building Permits 2.124 Millions 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 Economic numbers. You can find latest numbers in the table above. Housing starts and housing permits were released and as expected were lower than previous months due to latest storms in the gulf of mexico. The crude is now around 65$ 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 now at 3.75. Mr. Greenspan is sticking to it's gun and did not mention any easing on it's policy of rate hiking despite devastation in Louisiana. Mr. Grrenspan even mimimized Katrina effect on economy. We now know that we will get another rate hike in december. We have only 3 weeks 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 20.13 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