this sounds stupid but i need to ask. when the stock market jumps at the end of the day you always hear that someone big was buying s&p or down futures. how does buying futures affect stocks? thanks
because there is an inherent correlation between the cash market(stock index) and the futures, they will trade in tandem. If a descrepency arises in this relationship (i.e.- your example "a big guy buying futures"), arbitrageurs come in and push them back together in an attempt to make a profit(i.e.- your example, arbs traders would sell futures, pushing them down, and buy the cash market, pushing them up). The gap gets filled and the relationship continues...
If index futures rise/fall too much above/below fair value, computer programs are triggered to buy the stocks that compose the index, while selling the futures. see: http://www.indexarb.com/