i was just reading wikipedia for the DJIA. in the article it says quoted: "On the days when not all the components open at the start, the posted opening price of the Dow is determined by the price of those few components that open first and the previous day's closing price of the remaining components that haven't opened yet; on those days, the posted opening price on the Dow will be close to the previous day's closing price (which can be observed by looking at Dow price history) and will not accurately reflect the true opening prices of all its components." this makes me wonder how many companies and which days? i wonder if there is lag some mornings when ES will exibit divergent price movement up until the time when all companies representing the DJIA average open up and bear the full weight on the averages price on the market. i may be really oversimplifying things but i would imagine this, at times, may cause a correction in ES that could cause a convergance of price between the two markets. to be honest i have not carefully charted how much ES and DJIA prices converge/diverge on a daily basis only that they tend to move in tandem sometimes one leading the other. do you think my assumption reasonable to any degree?
1) If you take the position that the futures market "represents" the index instead of the cash market, especially during the first 30 minutes of the session, you'll save yourself a lot of hassle. 2) Until all issues in the DJIA have opened, the cash-index quote that is displayed doesn't properly represent "reality". 3) At the time all 30 issues are open, a proper basis can be established to bring the cash and futures in-line with one another. In your language, the cash and futures can converge or diverge in order to reflect a proper premium or discount.