c07 JWBT016-Busby October 1, 2008 21:9 Printer: TBD
90 STRATEGIES TO WIN
available at this time. First, you will recall that 7:30AMnews falls within
Time Segment 2; Asian exchanges have closed and the day’s trading ses-
sion in the United States has not yet begun. But in Paris, London, Frankfurt,
and across Europe, financial markets are active. I use the Dax futures as
an indicator of sentiment. The 6:00AMDax price is a benchmark for me.
Before the news is released, I write down that important 6:00AMnumber.
Then I am able to gauge the market in relation to its movement above or
below that price. I also look at the other futures indexes like the S&P, Dow,
and Nasdaq. In relation to the Globex or nightly highs and lows, where are
these indexes trading just before the news is known? Are they near their
lows or their highs? If the futures indexes are trading near the nightly lows,
that is probably an indication that traders are anticipating some bad news.
Likewise, if they are trading near their nightly highs, traders are likely ex-
pecting good report data. If, in fact, the news is good, prices should surge
upward and there should be new Globex highs as a result of the informa-
tion. Or, if the news is negative, there should quickly be new lows.
If the market fails to make a new low on “bad” news or a new high on
“good” news, take note. Here is how I use that information. If “bad” news
is not bad enough to pull prices down to a new low, prices are likely going
up. Therefore, I see it as an early buying chance. The reverse is also true.
If the “good” news is not good enough to merit a major play by the bulls,
I sell. As confirmation that my analysis is correct, I check the E-mini and
the Dax. The Dax is probably moving up in price while the E-mini S&P is
trying to test the lows. When the S&P cannot break through those lows, it
changes direction and I make money.
Figure 7.1 is a chart of the E-mini S&P futures that depicts this trade.
On May 17, 2007, the Globex high on the E-mini was 1518. News was re-
leased and prices tried to move up above the high but could not do so. Fig-
ure 7.1 shows the market’s response when the bulls were unable to move
above the highs. A market that cannot go up generally goes down, and that
is what happened on May 17, 2007.
Another strategy for trading the 7:30AMnews is to gauge prices before
the news breaks as outlined above. That is, look at the Dax 6:00AMprice
and use it as a benchmark. Also note prices in the S&P, Nasdaq, and Dow
to determine if those indexes are trading near their highs or lows. If the
bulls or the bears are able to reach a new high or a new low, wait for prices
to settle and retrace. It is highly likely that after a few minutes they will
do so. If there is a strong sentiment in a particular direction, the move will
be repeated and you will have a chance to buy or sell on the confirmation
move. So, buy or sell on the second pass above the new low or new high.
As the chart in Figure 7.2 shows, this was a good play on May 11,- The second upward pass on the E-mini S&P was a great play for day
traders.