A1 Trading

Fundamental analysis guide

How to Trade PMI Data like a PRO

What is PMI?

The Purchasing Managers' Index (PMI) is a critical economic indicator that provides valuable insights into the health of the economy. As a lead indicator, the PMI reflects the outlook of purchasing managers, which can signal whether the economy is expanding or contracting. This makes PMI data essential for traders looking to anticipate market movements.

Reading the Index

A PMI reading below 50 indicates economic contraction, while a reading above 50 suggests expansion. Strong PMI numbers are typically positive for stocks and the country's currency, as well as for oil prices, but tend to be negative for gold. Conversely, weak PMI figures are generally detrimental to stocks and the country's currency, favorable for gold, and negative for oil prices.

If PMIs Are Strong:

Good for Stocks
Good for the Country's Currency
Good for oil
Bad for gold

If PMIs Are Weak:

Bad for Stocks
Bad for the Country's Currency
Bad for Oil
Good for Gold

Services and Manufacturing

PMI data is reported separately for the services and manufacturing sectors, providing detailed insights into different parts of the economy. This sector-specific information can help traders make more informed decisions.

Bonus:

It's important to note that in times of high inflation, strong PMI numbers can have a counterintuitive effect on the stock market. This is because robust economic growth can exacerbate inflationary pressures, leading to tighter monetary policy, which can negatively impact stocks. Understanding these dynamics is key to effectively using PMI data in trading strategies.

Where to track the data:

For those looking to track PMI data, the EdgeFinder offers a comprehensive tool for monitoring these crucial indicators.
A1 Edgefinder

All-in-One Fundamental Dashboard

Using powerful market data such as COT, retail sentiment, and seasonality, the EdgeFinder's top setups page will automatically build a list of the top buys and top sells.

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