September 30, 2005 Issue # 20

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 except ND100 are in a very tight trading range between the lower band and the moving average. Earning Season kicking off next week will tell us more. SP500 jumped back a little just above the moving average. ND100 had a fairly good week and crossed the moving average friday with good strength. Failed again to touch the lower band. DOW rebounded also the same way as SP500, now tagging the moving average and operating in a very tight range. Markets in a tight trading range 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 1228.81 23.71 13.52 3 ND100 Sell August 16 2005 1574.01 160166 -25.65 29.91 2 Dow Buy August 24 2005 10435 10569 234 149 3 SP500 Last Signal Comment Our new buy signal is now ahead 24 points. SP500 is in a very tight trading range between the lower band and the moving average. The moving average reflects that by being almost flat. If it can hold another 2 weeks we might have another attempt to break out above 1245. But if the first earning results for the third quarter are less than expected we can also have a fall off or can retreat again to the lower band around 1200. This 1200 mark is our current support and if broken our next support is at 1140. 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 26 points. ND100 had a good week especially friday when it crossed with great conviction the moving average on it's way to retest year high. ND100 did not issue an expected lower band touch buy signal for the second time in the past 6 weeks. The first financial results in the next 2 weeks will tell us more. 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 ahead 234 points with the latest buy signal. DOW rebounded nicely up to the moving average. It operates in a very tight trading range between the lower band and the moving average like SP500. For those who took the opportunity to enter last week can be proud of themselves. 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. Next week we might issue a recommandation to play early for November. Stay tuned. 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 +3.3 -5.3% +1.5% + 6.4%(revised) Durable Goods Excluding Transportation +4.2 -3.7% +2.6% +0.9%(revised) New Homes Sales -1% +6% + 2.1% Existing Homes Sales 7.29 Millions 7.15 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 4 Economic numbers. You can find latest numbers in the table above. Existing home sales were up 2% while new home sales were down a little. Durable goods orders were unexpectedly higher more than 3%. Those numbers are reviving inflation pressure. We saw this past week GOLD explode upward indicating inflation fear. The crude is now around 66$ 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 2 weeks left into the dangerous period of the year (August - Mid October). The next 2 weeks we will get the first financial results from several companies. If most of them are inline with expectations we might not have a traditional october sell off. 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 20.36 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