They are all the same - how do you use it?

Discussion in 'Index Futures' started by uexkuell, Apr 3, 2008.

  1. When looking at the index futures (ES,NQ,YM,ER2 and some smaller ones) and also at the according ETFs (SPY,QQQQ...) you see very high correlations.
    This applies also to some more exotic and the "bear" ETFs.

    On a major turning point of ES, NQ follows always. Same with the others.
    This is easy to see in hindsight.

    How do you take advantage of this?

    Did you find ways of using these multiple information channels to verify in realtime your suspicion that one of those turning points is coming up?

    I tried (by means of a program) to compute something like a synthetic averaged future symbol which included all the information (price and volume) coming from the various symbols (futures and ETFs). This approach led only to more noise.

    Did you find a way to reduce noise?
  2. lindq


    That's a good question. And not an easy answer.

    Correlation between indexes and their derivatives seems closely related in longer timeframes. For example, if you are looking at weekly or daily charts, they often seem very closely aligned.

    But move to intraday periodicities such as 1 min charts, and you will see a lot of variation. You can easily demo this yourself on your charts.

    For longer timeframes, the S&P can help guide decisions in both indexes and individual stocks, depending on your strategy. And a system based on the S&P is likely going to be very helpful in other indexes, ETFs, etc.

    But intraday, ER, ES, NQ AND YM will often follow their own path to the extent that there really isn't any guidance you can receive from one, or a custom instrument combining many. This has been my experience, and I regularly watch and trade these indexes.