c07 JWBT016-Busby October 1, 2008 21:9 Printer: TBD
News Pays 93way and the world is looking to our shores. Also note that at this time,
the open outcry pits at the Chicago Mercantile Exchange (CME) have been
operating for 30 minutes. I use the high and the low of this time frame as
a benchmark to gauge sentiment and evaluate prices. For example, say the
high of the S&P during this time is 1348 and the low is 1340; if prices break
above the high of the 30-minute range (1348), I consider the move bullish,
and below it (1340) I deem it bearish.
I use all of the data available to me. That is, before making this trade, I
look at the Dax to determine whether it is above or below its 6:00AMprice.
I look at the other futures indexes to get a sense of the market’s mood.
Are they making new highs, new lows, or just hanging out? I also check
indicators like the NYSE issues and the Nasdaq issues, and other statistical
data. However, I have one other important bit of data that can help me
at this particular time – I look at that 8:30 to 9:00AMprice bar on the S&P
E-mini futures. If prices move above that bar with support from the indexes
and indicators, I join the bulls and buy. If they move down with that same
support, I sell.
Although it is a few minutes later, I also trade news at 9:30AM, espe-
cially on Wednesday. On Wednesday, the EIA releases its weekly report
on petroleum inventories. A few years ago, I had never even heard of this
particular bit of news. However, with oil prices rising and supplies threat-
ened, this regularly scheduled news event is closely watched by millions of
traders around the world. On April 30, 2008, I tuned into the news and made
money. On that date, oil inventories were anticipated to be up by 900,000
barrels of crude. However, when the news broke, the actual figure was 3.8
million barrels. In other words, inventories were significantly higher than
expected. Since supplies were up, crude prices immediately fell. I shorted
an oil constructed exchange-traded fund (ETF)—OIH. OIH is traded on the
American Exchange. I went short at 197.66. Within five minutes, the shares
had dropped two dollars and within two hours they fell about another two.
However, when I made the trade, I exited some of my positions quickly
with a small profit. My game plan is to make some fast money to cover any
potential losses. Then I can hold a smaller portion of my positions without
risking my personal money. I have taken some of the market’s cash, and I
am funding my trade with the market’s money.
Figure 7.4 shows the OIH trade on April 30, 2008. The chart was gener-
ated on my StockBoxTMsoftware and contains a good bit of information.
However, the important aspect of the chart to note is how prices fell in re-
sponse to the news. The chart on the far left is a five-minute OIH chart. The
chart on the right is a crude oil futures chart. Both crude futures and OIH
fell quickly in response to the good news about supplies of crude.
The preceding trade was made with a new piece of software that has
been developed by DTI. The software is known as the NewsTraderTM.Prior