Courtesy of RSKsys The PREM is calculated tick by tick, every time that there is a trade for @SP.P, TS uses this value of @SP.P minus the previous value of the $INX to calculate the tick of the $spinx. The same procedure is used with the $INX. The values for the minute bar are taken from the tick data generated for the $spinx itself. Since not all stocks in the $INX open at the same time, the first few minutes of the $INX will be inaccurate. Consequently, the PREM will also be inaccurate until all stocks have opened. Additionally, since the futures close at 3:15 cst while the cash index closes at 3:00 cst. any PREM delivered after 3:00 cst is wrong. HOW TO READ THE PREM Rule # 1: Look at the correct part of the bar. Use a 1 minute chart. The high of the S&P 500 FUTURES (spoos) corresponds to the high of the prem. The low of the spoos corresponds to the low of the prem. Rule #2: When ever there is a new high for the day on the prem, it means one of two things. Either the prem is going higher or the spoos are going higher or both. When ever there is a new low on the prem, either the prem is going lower or the spoos are going lower or both. This may seem ambiguous, but its just a fact of observation. Consider these scenarios: The prem hits a new high. Read the high of the spoos. If the spoos did not go any higher before they continued to short, a price point was created. When the spoos turn up, they will likely rally right back to the price associated with the last new high on the prem and likely go higher. The prem hits a new low. Read the low of the spoos. If the spoos went no lower before they began to rally, a price point was created. If the spoos turn and rally up a bit, likely they will short again and return right back to the price associated with the last new low on the prem and probably go lower. The spoos hit a new low. The prem hits a new high (rare). The sell off is very likely over. The spoos hit a new high. The prem hits a new low (rare). The rally will likely stop like it hit a brick wall, reverse and begin to short. Rule #3: New highs or lows on the spoos should be preceded by new highs or lows on the prem. If they are not, the market is poised to turn. Reading the PREM is not a strategy per se. It is a leading indicator and can regularly predict where the spoos are going to go before they get there, especially when the spoos appear to be doing just the opposite. New highs and lows on the prem are by themselves fairly decent indications of large institutional program trading going on, without necessarily knowing predetermined buy sell execution levels. If program trading is going on you best be sure not to trade in the opposition direction.
The PREM = the premium on any of the available data feeds. The symbol for the premium varies according to the source. What is shown on the chart is from Tradestation. Also PREM.Z, and EPREM AO from two relatively good data vendors
You write that at 9:01 the SP Prem made a new low while the ES Prem simultaneously made new high. So which Prem do you follow ?
You write that at 9:01 the SP Prem made a new low while the ES Prem simultaneously made new high. So which Prem do you follow ? My experience shows that when both situations take place simultaneously, I will favor the contra-indicator with a tight stop. If you are wrong it wont take long to find out and then you can adjust accordingly.
While there is plenty to talk about here, this chart shows a new low on the PREM (yellow arrow) at 14:29. The spoos are at 931.00. The predictive value of the PREM suggests at return to 931 or lower on 6/11/09 based on the June contract.
Isn't there also a new low on the S&P PREM at around 1 pm ? If yes, why shouldn't the market revisit that level as well today ?
Only the most recent new high or low on the PREM feeds is considered predictive, unless the spike is gargantuan. The PREM shift down today is generally viewed as very negative for the market. Typically we have a shift UP and a gradual degredation of the PREM over the contract period. But today we shifted down significantly.
Yes in that instance, but is it better than 50/50. Running q quick test using YM because thats happens to be the symbol I'am working on at the moment. Using the condition that if YM makes a new high and PRYM.Z or DJ-PREM.Z make a new low on the same bar then sell short with a $100 profit target and $150 stop just to capture good entry's. In the past 3 months there have been 34 occurrences of this happening and 17 winning trades, which in turn is 50/50.