ES Vs. ER2 spread, why?

Discussion in 'Index Futures' started by TradStSOX, Mar 14, 2008.

  1. Since yesterday, the spread between ES & ER has been much wider than usual, ER2 rallied 1% more than ES! Why?
    Usually, it's a case of pump & dump, when this there other reasons?
    I know they have different underlying but, regardless when ES performs poorly, it should pull down others too, or Not?
    For me, someone is selling the ES and buying the ER and when the time is right, hit the reverse!
  2. yeah ER2 price action yesterday was very baffling. ER2 was big in the green well before any other futs.
  3. Asset allocation
  4. can you elaborate more?
  5. money going from big caps into small caps.

    theres just periods of a couple of days here and there that $RUT act like this.
  6. is it because the funds expect the small caps will perform better in the near future? if so why do they believe so, what's the logic behind it and when you say a couple of days, based on what?

  7. It just happens that ER2 goes thru periods(a few days) in which it is way more heavily bought/sold than ES/Dow. ER2 was behaving like this during that last move up to 730.
  8. yes, this is what I've noticed too. it usually leads the ES in both ways but this time it's leading on the way up and lagging on the falls but, I'm trying to understand why this happens and when, hence what is it's message?

  9. nolajy


    as interest rates fall this significantly helps the small cap companies because they need loans just to function when the economy slows... also small caps usually outperform the big caps.. you spotted an asset allocation rotation...
    my guess is the institutions that have been takign a beating with sp 500 stocks feel that a bottom is near and they want to take full advantage of the rally early in the beginning.. they buy r2k stocks and carch a 3-5 % rally.. then they get out which drives r2k and sp 500 lower.. then they move back into sp 500 stocks which are somewhat less volatile.. thanks for the info.. this is just my two cents, but i think you pointed out some evidence that the end to the sell off is near.

    if r2k goes up first leads on rallies,.. and lags on sell offs.. then this showing accumulation/markup or an uptrend in my mind
  10. jj90


    You guys do know ER has a higher beta than ES right?
    #10     Mar 14, 2008