One of the points I recently chatted to a client about was the general propensity for calendar pairs to be somewhat delta directional with the underlying flat price prompt month future. At times, the same can be true for other spread combinations ( like a butterfly for example ) as well - but on a much less frequent basis, and for shorter periods of time.
Bone, thanks as always for posting these charts. One suggestion ... if you color code the Title to match the color of the chart line, it will be easier for us to read.
I wanted to mention the use of technical analysis with limited or incomplete data. I have a rule that I use with clients where I want at a minimum several months of good, solid, data available before we apply our study and trading model to it. Now some will rightly argue that several months might not be enough, but you have to remember that intramarket spreads are unique beasts with limited shelf lives. By definition, you cannot use data consolidation or continuous contracts for intracommodity spreads because the price action of the specific expiry of the commodity in the spread expression is what creates trading opportunities.
This is obvious, but simplicity is beautiful and this tip works over the long haul. For those of you who use technical analysis, from my experience looking at an instrument in charts with multiple time frames should reduce your entry error rate. It is almost always the longer time frame that introduces the moment of clarity. For example, if you are day trading on 2 minute candles, a peek at a 60 minute chart might keep you on the better risk/reward bias.
Webinar distributed today. We discuss the idea of having your FCM 24 hour execution desk execute your spread trades for you - in lieu of paying for a third party software platform like TT or CTS or CQG.
In terms of price data, for a singular flat price instrument, of course it makes the most sense to use consolidated continuous data whenever possible. For INTER market spreads, like US Tens vs. Thirties, I always use consolidated continuous data if it is available. Alternately, for INTRA market spreads, there is no such thing because it is the price action and supply/demand characteristics of a specific and particular expiry within that spread combination that is of consequence in terms of price behavior and trade entry opportunity.
Price improvement can come at a severe price - especially with fresh entry signals in fast moving markets.