In This Issue

Stock Index Rollover notice

Stock Index outlook for December 2005 by TradeTheNews.com

Reports and Expiration Notices

December 7th, 2005 — Issue #304

Stock Index Rollover notice

For those of you trading the "Big" S&P 500 futures, E-Mini futures, or any Stock Index contract, it is extremely important to remember that tomorrow - Thursday, December 7th - is rollover day. It is recommended that all new positions be placed in the March 2006 contract as of Thursday's trade date. GLOBEX will not roll over until Thursday morning at 8:30 A.M. Central Time, despite the fact that the trade date changes today - Wednesday afternoon.

Further, please be aware that the executing brokers in the September contract of the "Big" S&P 500 and NASDAQ 100 will not be "held" on ANY order, and that they will not take Cancel and Replace orders at all beginning Friday September 9th. Also, please be aware of liquidity issues in the 2nd step E-Mini S&P and E-Mini NASDAQ. Expect sharply decreased liquidity in the September contract beginning Thursday morning. Carefully consider whether you wish to place Market or Stop orders after that time.

Traders with electronic trading software should make sure that defaults reflect the proper contract as of Thursday morning.

If you have any questions, please contact us.

Stock Index outlook for December 2005

by Erik Gustafsson, TradeTheNews.com

December Redux?

As the end of 2005 draws near, the question arises: Will the stock market repeat last year's performance? That is to say, will a strong November be followed by further gains in December? With the Dow Jones Industrial Average closing in on 11,000, after six months in a lower trading range, the consensus seems to be "yes." A variety of economic data, earnings calls and Fed actions could drive the stock market higher or send it lower with a few surprises.

The Federal Open Market Committee will issue its latest rate decision on December 13th. All expectations are for another quarter point increase, bringing the base interest rate to 4.25%. After some recent data, including the robust GDP numbers, futures traders are betting that the Fed will raise rates three more times before pausing. As we enter the nebulous "neutral" zone, which some Fed governors have described as around the four to five percent range, market watchers are anxiously awaiting a sign from the FOMC that the rate hikes will soon come to an end. Any change in the FOMC statement will therefore cause a stir in the markets, and may be the most highly anticipated event of the month.

The holiday season brings thoughts of hearth and home. The housing market continues to percolate as New Home Sales numbers surged to record highs again recently, topping the 1.4M rate. Going in to the traditionally slower winter season, home sales and construction almost certainly have to pull in. The hearth could also cause some concerns--heating all these new homes may cost a pretty penny this winter. After a mild autumn, frigid weather has set in and energy demand is back on the rise. With prices still elevated by the record hurricane season, any severe cold snap could send oil and gas prices rocketing back up to the levels seen just before Katrina hit the Gulf.

The holiday season also means shopping. A widely publicized survey auguring a 22% increase (year over year) in holiday spending has led to improved expectations at high end and discount retailers. The monthly consumer confidence numbers may bear this out. November Consumer Confidence rebounded sharply from the two-year lows notched in October, and the University of Michigan Confidence indicator also perked up last month, after slumping to 13-year lows. A further recovery in these indices this month could ease the minds of some retailers worrying about holiday receipts.

On the earnings front, December is a pretty quiet month, with a few notable exceptions. Most of Wall Street's big names report their earnings this month, with Lehman, Goldman Sachs, Bear Stearns and Morgan Stanley all set to issue their quarterly numbers. The big houses are expected to report strong numbers, and a healthy Wall Street is a good indicator for the markets and the broader economy, as well.

Since December is the retail sector's most important month, retail related earnings reports will be closely scrutinized particularly for their guidance. With Target's recently reduced same store sales forecast still casting a shadow over the sector, December will provide a varied sampling of earnings reports that could yield some insight into the health of this shopping season. Department store slash discount retailer Sears Holding reports early in December, and big box electronics seller Best Buy releases its earnings mid-month. As internet purchasing continues to draw holiday shoppers who detest the mob scene at their local mall, express shipper FedEx, which is expected to report in the third week of December, could be a window on how e-tailing is doing this year. FedEx already bumped up guidance for the year, and further hale commentary from the company would put a shine on retail expectations.

Research in Motion is also on the earnings radar for December. The maker of Blackberry PDA's recently trimmed its subscription estimates, but is also facing an injunction that could enforce a complete shutdown of US operations. Some analysts are now expecting RIMM to forge a quick settlement with NTP.

Other notable events this month include the Nasdaq-100 Index reshuffle which will be announced early in the month (with Google a likely addition; see our TTN Research note, and quadruple witching for options expiration, all as money managers conduct their year end "window dressing."

So, hopes are high for a replay of last December, with the Santa Claus rally in full swing. A few key data and earnings releases, particularly the FOMC statement, could grease the runners on.

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Disclaimer: There is a risk of financial loss in futures and options trading. Futures trading is neither easy nor an easy way to make money. It takes hard work to have success. Please use sound money management when trading futures. Past performance is not necessarily indicative of future results. Nothing in this newsletter is intended to be a trading recommendation for you to buy or sell futures or options. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed. Readers are solely responsible for how they use the information in this newsletter.

Economic Reports and Expiration Notices

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!