We asked 8 successful traders what reports they rely on most. Here's what they said...

September 21, 2014 05:45 AM

We all know that the unemployment situation report that comes out on the first Friday of every month is the most important economic report for creating volatile swings in markets—but it is just one of dozens of reports that come out monthly. There are some doubts about the validity of some reports produced by the government.

We asked our experts: What reports do you follow and find most valuable in your fundamental research?
Here's what they said.
Carl Larry @oiloutlooks
In crude oil, I follow the Energy Information Administration's weekly Petroleum Status Report. The report, released on Wednesday, details all of the data submitted by oil producers. Similar to the Bureau of Labor Statistics unemployment numbers, there’s a lot of week’s where there’s something amiss and we can expect an adjustment by the end of the month. Then again it’s like they always say, “Close enough for Government work.”

Carl Larry is the president of Oil Outlooks and Opinions LLC. He provides daily oil market guesstimates with a dose of pop culture.
Rich Ilczyszyn @iiTrader
The granddaddy of them all is the nonfarm payroll number, which is arguably the most important component of the monthly Employment Situation Summary, that comes out the first Friday of each month. This report is an estimate from a survey of about 400,000 business establishments that account for about one-third of all jobs in the country. It is a separate survey than the one that caluclates the 'headline' unemployment rate. Though great emphasis is place on this report, because it is a "phone survey" there is room for error and its the revisions from previous months could trump current reads.
Along with the release of nonfarm payrolls is hourly earnings data which has slowly taken more merit than in the past and has been a focus of Janet Yellen’s more recently. We at iiTRADER have always followed both Institute of Supply Management Manufacturing (survey of 300 manufacturing firms and monitors employment, production inventories, new orders and supplier deliveries) and ISM Non-Manufacturing data (surveys 400 non-manufacturing firms' purchasing and supply executives, within 60 sectors across the nation). This ISM data can help indicate sustainable growth and better than expected data should have a positive effect on the stock market.

We also closely watch Beige Book which is published eight times a year ahead of FOMC Meetings and can help divulge us as traders and investors any surprises that may come out of the meeting. Of course CPI and PPI data are very important as they are the best indicators for inflation that we have. Furthermore, they have given us insight over the last two years as to leeway the Fed may have in taking a dovish or hawkish stance compared to inflation targets they set. Lastly, GDP is the value of all goods and services produced in a nation during a specific time period.
GDP must be closely watched and is a major indicator, however this number does see several revisions as the year unfolds and traders must be aware which GDP data point is actually being released.
Rich Ilczyszyn is Founder and Chief Market Strategist of iiTRADER.com. Rich excels at creating dynamic trading strategies for clients that establish solid positions, while remaining flexible enough to capitalize on market opportunities when they arise.

Alan Rohrbach @MacroMeister

While the U.S. Employment report is indeed a key influence early each month, the first thing to do is look at the subsets. A constructive headline number can be diminished by weak Hourly Earnings.

And the same is true for other reports. US Retail Sales is also an important guide, because it goes beyond employment statistics to indicate whether consumers are really spending. ‘Retail Sales ex-Autos and Gas’ is the most important due to the distortion from wide swings in energy prices and automobiles being such a high priced item.

That is the sort of thing which can either confirm or refute the accuracy of the headline economic data in many cases.

Lead Analyst and President of Rohr International, Inc. Alan Rohrbach is an international equity index, interest rate and foreign exchange trend advisor. His forte is ‘macro-technical’ analysis of how fundamental influences blend with technical aspects to drive trend psychology. Clients include international banks, hedge funds, other portfolio managers and individual traders.

John Caiazzo @jlc7111
I don't use fundamental research but always looking at traders reaction to the data.

John Caiazzo has over 40 years of experience at brokerage firms across the United States. He provides the end of week market wrap-up.
Kara Boniecka @lakeshoreATS

Copious research has been done to try to determine which numbers have real predictive value for future equity market values. You wouldn’t necessarily know which numbers merit careful consideration from the coverage in the financial media because they must report on every number. Many macroeconomic factors may have only limited relevance for you as a trader. 

As with so many things in life, the 80/20 rule applies. In this time of information overload, it’s helpful to focus on the most meaningful factors so you can be nimble in your response to changing market currents.

Source: Chris Potter

At LakeshoreATS, we currently track eight macro factors to help us gauge where the economy, and by proxy equity markets, is headed. Money supply is one little-watched factor that has shown actual predictive value. M2, composed of cash, checking/savings accounts, CDs, and money market funds, is the aggregate mostly closely watched by traders as it is the most inclusive, stable, and the best representation of actual liquid currency available for trade.

When money supply rapidly outpaces economic growth then there are many more dollars being used to purchase the same amount of goods as before. This can be the precursor to inflation run amok. Money supply might not be the single most important factor worth tracking, but it certainly deserves attention as an early warning signal that the Fed might need to take action that could negatively impact markets.

Kara Boniecka is the founder of LakeshoreATS and the author of Avoiding Bear Traps: Easy Macro Factors for Smart Traders, which provides concise guidelines for deciphering economic news and navigating market corrections of all sizes.

Matt Weller @MWellerFX

It’s easy to get lost in the cacophony of global fundamental reports that are released on a monthly basis, so it’s important for traders to identify what data points the market is focusing on at any given time. While jobs and economic activity have been strengthening for years, the fundamental laggard in the post-GFC recovery has been inflation.

Therefore, I am most focused on central banks’ preferred measures of inflation. For U.S. traders, this means keeping an eye on the Fed’s preferred Core Personal Consumption Expenditures (PCE) readings, rather than the more widely-followed Consumer Price Index (CPI) readings. Likewise, European traders should keep an eye on the Harmonized Index of Consumer Prices (HICP), the ECB’s favorite measure of prices.

If inflation starts to perk up in the second half of this year and heading into 2015, central banks will finally be forced to raise interest rates from the current subdued levels, and global markets can return to a more “normal” environment.

Matt Weller is the Senior Technical Analyst for FOREX.com. He contributes regular updates on various currencies and commodities throughout the day.

Dan Gramza

Before we begin looking at specific reports, it is important to keep in mind that different reports will have different influences depending on where the market is in its development cycle. For example, is the market turning from a down move as in March 2009, or at all time highs in 2014?

It is also important to keep in a global context how this report compares to other economic and geopolitical news occurring in other parts of the world. This is why there may be a very bullish report in the United States, but the market trades lower because other events or reports have occurred in other parts of the world and has dampened the impact of the U.S. report.

I am very interested in fundamental reports and I want to know if there is a report coming during the trading session. However, I do not trade the result of the report—rather I trade how the market absorbs the report based upon price action.

In the current market environment, I pay attention to Housing Starts, Existing and New Home Sales, Durable Goods orders, Jobless Claims, GDP, Personal Income and Outlays, ISM Mfg. Index, International Trade, FOMC meeting announcement, Consumer and Producer Price Index and Retail Sales.

Dan Gramza is President of Gramza Capital Management Inc. and DMG Advisors, LLC. He provides daily market updates from around the globe on subjects ranging from the Nasdaq and currencies to crude oil and grains. 

Matt McKinney

For me two of the most important reports I follow that are specific to one sector, the energies, is the American Petroleum Institute's petroleum production report that comes out at 3:30 p.m. central on Tuesday afternoon and the EIA inventory report that comes out on Wednesday mornings at 9:30 a.m. central.
These reports show us where we stand as far as supplies from week to week in crude oil, unleaded gasoline, and distillates (diesel, jet fuel, and heating oil). These reports will also let us know how the refineries are operating and at what capacity. Please understand that this afore mention information isn't all that these reports disclose, but that's all I really care about.

Another critical report for me is in the grains sector. Once a month we get what is commonly referred to as the USDA numbers. For example this coming Thursday we will get the USDA crop production, supply and demand report as well as export inspection numbers.
Finally, for me it's the Fed. Once a month the Fed let's us know what the interest rates are going to do and nowadays how much QE will be coming off the table. This report effects many markets I believe like the indices, the financials, the currencies, and the precious metals.

Matt McKinney is a full-service options broker at Zaner Group both buying and selling energies, metals, grains, softs, currencies and the 30-year bond market. 


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About the Author

Lauren is the editorial assistant for Futures Magazine. She graduated from DePaul University in 2013 with a degree in English.