Does the ES or the SP500 pit traded futures contract has any influence over the SP500 cash index ? What i know is the opposite , the futures contracts track the cash index ...
The futures are an excellent tool for market manipulation before the cash market opens. Lately the have helped the banks raise capital by selling shares on the open market. Jack the futures up overnight at very little cost. The specialist can gap open there respective stocks and start distributing, this is accompanied by the financial media spinning some story. Wall Street works together to take as much as they can from the masses.
I dont think someone trades GS or SKF is not a cool guy , cool guys trade both stocks and futures .. Anyway my question is there any influence for the ES and the Sp pit contract over the cash index during market hours ?
They should not, since they are derivative. But this derivative has alot of influence now to be honest.the reason being that the liquidity is so big the implied tradable money in the ES rivals the money in the cash market. Money influences money you see.
They can run arbitration algorithms using derivatives and the underlying baskets of stocks. So, really, whatever has the most pressure on it at any given moment has "control," IMO.
I think the way it works is when the stocks that make up the SP500 don't have any significant orders to push them, the mm's keep an eye on the futures and push the stock prices along with it. Since the cash index shadows the underlying stocks it will move in the direction they move. It all happens so quickly I haven't found out just how it's done though. Probably with some sophisticated software program. I can't imagine the mm's sitting there manually doing this. If anyone knows how it is done I'd like to hear it.
as susannah had said, there is an arbitrage relationship between the futures and cash market and the algorithmic programs the big boys use keep the relationship so tight, there is no way you or i could squeeze our tiny asses in to make a penny. but yes, if there is a bunch of money going into ES contracts, for whatever reason, then by way of those automated programs, the cash market will follow it. and if there is a mass selloff of the cash market's stock(s), then the programs will sell the ES/SP futures contracts commensurate to the $SPX decline. basically, they alternate as leader and follower all day kinda like when you walk your dog or play naked leap frog with your trading room buddies...i mean...uh...significant other.