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 Year end rally now overbought. SP500 and DOW challenging year high level. SP500 is now over previous year high of 1245. SP500 is now overbought. ND100 breakout above 1625 continues. ND100 is also overbought. DOW had another good week. DOW is now right slighly above resistance of 10650. DOW is also overbought. Year end rally now overbought 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 1247.27 42.17 12.55 3 ND100 Buy October 6 2005 1552.94 1679.85 126.91 26.49 3 Dow Buy August 24 2005 10435 10766 331 80.29 3 SP500 Last Signal Comment Our last buy signal is now ahead 42 points. SP500 is still above the upper band. SP500 is now challenging previous year high of 1245. SP500 is now overbought with an RSI reading of 79. We can now expect short term set back. Since ND100 broke above year high already we can hope for SP500 to do the same. However I do expect this market to continue up slowly for almost the rest of the year and possibly reach 1300 before year end. Our 1170-1180 support level is now an official support level. Our first support is now at 1180 and our next support is at 1140 and the next one is between 1080 and 1100. We are now starting our fourth cycle this year. ND100 Last Signal Comment Our last buy signal is now ahead 127 points (8%). ND100 had another good week and is still above the upper band. ND100 is highly overbought with an RSI reading of 90. We can expect a short term set back soon but I do believe the up trend will stay for almost the rest of the year. We can consider that our first support is now at 1530, our next support at 1500 and the next one is at 1410. DOW Last Signal Comment We had our last buy signal on august 24. So far we are ahead 331 points with the latest buy signal. DOW is now challenging resistance level of 10650 and is breaking out above it. DOW is now overbought also with an RSI reading of 81. We can expect a short term set back soon. We can also expect this market to continue the current rally almost for the rest of the year. Year high of 11000 is now at reach and should be tested before year end. We had so far already 3 completed cycles this year. Our first support is now at 10200 and our next support is at 10000. Special Option Strategy Update Our December 1170 PUT contract sold at 2.60$ now worth 1.35$. This trade is on solid ground and should yield another good profit. 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 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 Apr 2005 PPI +0.7% +1.9% +0.6% +1.0% Unchanged -0.06% Core PPI -0.3% +0.3% +0.2% +0.4% +0.1% + 0.01% Retail Sales -0.1% +0.2% -2.1% +0.3% +1.0% 0.3% + 1.5% CPI +0.2% +1.2% +0.5% +0.5% +0.1% - 0.01% + 0.5% Core CPI +0.2% +0.3% +0.1% +0.1% +0.1% + 0.01% Unchanged Housing Starts 2.01M 2.13M 2.04M 2.042M 2.045M + 0.02% Building Permits 2.07M 2.22M 2.14 Millions 2.167 Millions 2.132 Millions 2.11 Millions 2.15 Millions Employment 56,000 -35,000 211,000 242,000 166,000 104,000(revised) 275,000 Durable Goods Orders -2.1% +3.8 -5.3% +1.5% + 6.4%(revised) Durable Goods Excluding Transportation +4.2 -3.7% +2.6% +0.9%(revised) New Homes Sales +2.1% -1% +6% + 2.1% Existing Homes Sales 7.28 Millions 7.29 Millions 7.15 Millions 7.35 Millions ISM Index(Manufacturing) 59.4% 53.6% 56.6% 53.8% 51.4% ISM Services 60.0% 53.3% 65.0% 60.5% 62.2% Factory Orders -1.7% +2.5% -1.9% +0.9% +0.7% GDP(Gross Domestic Product) Numbers 3rd Quarter 2005 2nd Quarter 2005 1st Quarter 2005 4th Quarter 2004 3.8% 3.3% 3.8%(revised) 3.5% Inflation Numbers 3rd Quarter 2005 2nd Quarter 2005 1st Quarter 2005 4.3% 2.4% 3.1% This week we had several key major Economic numbers. You can find latest numbers in the table above. The PPI came in 0.7% higher but the core PPI showed a drop of -0.3% which was quite a surprise. The CPI came in at +0.2% and the core CPI was also +0.2%. The retail sales were down -0.1% but the retail sales excluding auto was up 0.9%. The housing starts were down 5.6% while the building permits were also down more than 5%. Those numbers tend to show that the rate hikes we have seen in the past 18 months are now having their effect especially if we look at the housing markets showing a significant drop for the first time in 2 years. The inflation numbers were good and helped push the market in the last 2 days of the week. We can now start to speculate about when the interest rates increase will stop. My feeling is we will have 2 more and that set. Time will tell. The crude is at 57$ and continues to slide. If the crude can stabilize under 60 for a long time it will create more stability for prices and keep the inflation under control. The prime is now at 4.00. Mr. Greenspan continue to fear inflation and foresee probably 2 other rate hikes (one in december and another one early in 2006). We are now in the best period of the year. Financial results we got so far were inline with expectations and inflation fears seem to ease a little. Our yearly rally is now in good shape. The SP500 PE ratio is at 20.68 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.