My guess would be that program trading is triggered in most of the markets simultaneoulsy off of the same events (technicals, news, econ. reports, etc.) I don't think what you're noticing is simply the result of "humans" in one market reacting instantly to humans moving another market.
Do you mean that people are using the same programs to trade more indices? Ummm... that could be an explanation. Thank you
(sorry for the multiple posts) Re the OP: To me watching 2 or more markets comes in handy when a key support or resistance level is being approached, say in both YM and ES ... maybe it hits first in YM and a strong reversal begins immediately ... you could be still waiting for your ES to touch S/R and trigger your trade, but it may never get there, as the YM is already dragging the trade away from you.
The reason you see similarities is that the S&P 500 while representing 500 different stocks, gives a higher weighting to the companies with the highest market caps. The DJIA holds the 30 stocks with the highest market caps. Since a higher weighting is given to the largest market caps in the S&P, they move the index almost as easily as the DJIA. The moves are not as large point wise in the S&P because of all the extra stocks provided in the index. I believe this is also why you make more per tick in the ES than you do on the YM. The divergences come between the ES and YM when you have a lot of NASDAQ heavy sectors (sectors with a majority of NASDAQ stocks in them) underperforming because many of these companies are represented in the S&P 500.
yes, I considered this option. I don't know how the S&P 500 is made, but in that case I would question its usefulness.
I may be reading this wrong, but I would not question the usefulness of the S&P 500. The S&P is the flagship index for getting a picture of the overall market. While the DJIA gives us a look at the biggest companies out there which usually indicates a trickle down to companies with smaller caps, the S&P actually gives us a better look at this effect. In other words, if the DJIA is getting hammered really bad, and the S&P is not, we know that most of the companies in different sectors are not doing as poorly as the big caps. This is important to know if you are looking to divert money out of the blue chips to minimize losses. That is just one example, of the many out there.
I find personally, that whether I am trading ES or ER2, the trade works best when both are moving in the same direction. I filter trades that way. If the set up is mediocre and one is going the opposite of the other I may just pass.
Hi andread, Do you trade the ES or have traded it in the past??? If not, do you use the S&P 500 Index for what you do trade. I'm just curious because your questions or statements are starting to imply you don't trade the ES or never have even though its obvious your monitoring the ES. Mark
I see your point. I did try to trade the ES for a while, but since I'm inexperienced I realized that I still have some work to do. Now I'm looking more at the YM (no trading), and yes, I'm looking at the ES too, but more to learn how it works than to monitor it. Sometimes I also like to look at the ER2. Rarely the NQ