Conspiracy theorists are buzzing this morning regarding the release of the weaker than expected Chicago PMI. Economists were expecting a level of 52.0, but the actual level came in well below 50 (46.1). Even though the report was released to the general public at 9:45 ET, the S&P 500 began its nosedive minutes before the official release of the report. At first glance, most would agree that the report was leaked.
While everyone likes a scandal these days, a deeper look at an intraday chart of the S&P 500 and the firm that compiles the Chicago PMI (Kingsbury International) shows that there was most likely nothing nefarious taking place. The S&P 500 certainly did decline prior to the official release, but traders should be aware that anyone who wants early access to this report can do so provided they are willing to pay for it.
On the company's website, Kingsbury describes the Chicago PMI as, "a proven monthly ‘first look’ at business, government and NGO economic activity in the USA." They then go on to say that subscribers to Kingsbury's data will receive "access to this market-moving data 3 minutes before public release." In other words, Kingsbury will 'leak' the report to anyone who is willing to pay at least $200 per month.
With this information in mind, another look at an intraday chart of the S&P 500 shows that today's decline began at 9:42, which was (not coincidentally) three minutes before the official release of the Chicago PMI when Kingsbury alerts their subscribers to what the official release will be. While there appears to be nothing illegal taking place, it does provide another example of how the market is stacked against the individual investor.
Great piece of research.
Posted by: Colin | September 30, 2009 at 02:32 PM
Why does Kingsbury have information prior to the public release. Or who do they buy it from? Should that be permitted?
Ilene (http://philsbackupsite.wordpress.com/ or www.philstockworld.com)
Posted by: twitter.com/ileneca | September 30, 2009 at 03:00 PM
They have it early because they compile the data.
Posted by: Paul Hickey | September 30, 2009 at 03:05 PM
Wow! No wonder "joe average" can't make money consistently in day trading - the deck is almost certainly stacked against him! Talk about the "house" always winning....
Posted by: Mike | September 30, 2009 at 04:28 PM
Mike,
If you can't afford the $200 to get the report early, you shouldn't be day trading. Actually, I would argue you shouldn't be day trading at all, but to each his own...
Posted by: Joe Calhoun | September 30, 2009 at 04:36 PM
Sure, nothing nefarious going on here. Business as usual. How many other market reporting agencies are getting kickbacks for early release? It begs the question if there are bonuses for massaging the data in certain directions. If so, the reaction would be --- What's wrong with that? If you aren't rich enough to influence the numbers, why then you shouldn't be trading.
Posted by: PTDBD | October 01, 2009 at 10:26 AM
Excellent technical analysis. I think a lot of data is leaked. But it doesn't necessarily work out in a particular direction, thus you could even lose money when you know abt the data ahead of time. In this case though, you are 100% correct, someone who sold ahead of the "leaked" data made good coin.
http://psychologyofthecall.blogspot.com/
Posted by: Adam | October 01, 2009 at 01:37 PM
PTDBD,
This report is produced by a private company, not the government. Since they own the data, they can do with it what they want. If a government agency was taking kickbacks for early release, that would be a problem since taxpayers paid for it.
Posted by: Joe Calhoun | October 01, 2009 at 07:23 PM
I find it annoying that a company is profiteering off proprietary reports that move the entire market. Wait, that's the entire investment banking model.
Posted by: Brian | October 02, 2009 at 05:00 AM
Paul, I guess the Michigan Consumer Sentiment report is also available early to subscribers...
I think Bespoke would do readers an amazing service if they could do a blog post breaking down subscriber available reports vs non-subscriber.
Posted by: scorptraduh | October 04, 2009 at 03:57 PM
AS of October 30, this post is still true...
Posted by: Stephan | October 30, 2009 at 09:57 AM
I'm sorry, but there are so many people trying to build up a conspiracy theory about almost every issue in the world. As a matter of fact, this site is a conspiracy against economy.
Posted by: Generic Viagra | August 03, 2010 at 01:58 PM