To understand PMI (Purchasing Managers Index) in this context, you need to understand that the Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector by surveying more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A reading above 50 indicates expansion. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. More specifically, PMI is a rating from 400 purchasing managers who are asked to rate the level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.
Dawn-Renée's ISM Manufacturing PMI Trade; 05-03-10
There is a whole slew of related information that comes out with the ISM Manufacturing PMI. When the PMI came out today, it was slightly lower than expected, which caused an initial drop in the market. I did not get in right away because volume was low. Then the volume spiked and things started moving. At the point volume started increasing, we were close to one of Market Mover Trading’s proprietary Prediction Points. So I decided to buy long at 1190.25, knowing that we were likely to see a correction. The market continued to go down. However, the rest of the ISM Manufacturing data had come out and it was all positive, more orders, higher prices and lower inventories was GOOD news! I
Jody's ISM Manufacturing PMI Trade 05-03-10
knew the market should start to go back up as traders digested the rest of the ISM news. We were coming up on the next Prediction Point, so I decided to put another buy long order in at 1189.50, in case it got that low. It did, and then started going back up. I put my sell order for both contracts at another Prediction Point, 1191.50, but I got nervous and decided to pull down the sell orders to 1191.25. A bird in the hand…told you I was conservative! Anyway, I still made 2.5 points total on my money (1 contract @ $500), which is a 25% return or $125. Took me all of 10 minutes to setup and 7 minutes in the trade; and 7 minutes is a long trade for MMT!
To the above right, you can see Jody’s trade. He waited for the initial movement downward to stall out, then he bought three contracts long at a Prediction Point (1089.50). Then, his profit target, which was set at 1.5 points above his buy point, sold him out automatically at 1091 for 1.50 points, or a 15% return on his investment – $225! Jody said if he would have been thinking about it, he would have pulled his profit target up to the next highest prediction point at 1191.50. But profit is profit! What a great trading day!
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