Does anyone know what exactly keeps the prices of the ES and the S&P so close to each other? If the price of the ES is determined solely by traders, wouldn't it stray away from the index's price?
Computerized arbitrage. Think about it, if the price was different enough you could make risk free money buying the basket of stocks, and selling the ES until the price reached equilibrium. This is called capturing the spread, or statistical arbitrage. Thanks for playing, Bob tell him what he's won..
50-70% of all trades on any given day on the NYSE are made by a computer program! That's one reason it all works so well.
Remember that ES trades almost 24 hrs per day, but the stock market which the S & P Index measures, only trades about a fourth of that time (6 1/2 hrs). So, most of the time (17 hrs or so) the ES futures traders don't have that benchmark to guide them, they are just guessing about the "future". Stosh
Maybe "guessing" is a strong word. You may want to look at other indices around the world (Nikkei, Dax..). They are following each other very closely. And those indices are not based on guessing but on their own stock markets. Btw arbitrageurs are also using small differences between ES and the other indices.
You are correct that there are some clues out there in the off hours. However, due to the supposed 90% failure rate of futures traders, I suppose most of us are guessing most of the time.....just more so in the off hours. Stosh
So I guess actual news that is released in the Asian/Middle East markets is purely fiction and does not effect the overnight ES markets? What about S&P 500 co's that release their earnings after 4PM, just a few of those! ES does not mimick the CASH S&P index my friend. I sometimes wonder if people post purely for the sake of seeing their name on this board!