Tuesday, December 30, 2008

Trading the News: When Bad News Can't Keep a Market Down

Here's a great example of a worthwhile market pattern. We got some horrendous economic news regarding housing and consumer confidence around 9 AM CT, and the ES futures (chart above) dropped below their morning range. They quickly rebounded and moved solidly back into the range--an excellent tell that bad news could not dampen the holiday spirits of traders. We then broke above the morning range on solid volume, momentum, and NYSE TICK, leading us higher through the day.

Markets that cannot rise on good news and that cannot drop on bad news provide useful information for active traders. It's not the news itself, but the market's response to the news that is most important to track. That means that it's important to know which economic reports are coming out when and what the expectations are.
My morning Twitter posts include a listing of important economic reports and when they're coming out, which provides a heads up for seeing how markets trade at those times.