When futures lead, or trail, any meaning?

Discussion in 'Index Futures' started by LT701, Jan 30, 2007.

  1. LT701


    when es is up more points than $spx, does it mean anything relative to the times, when futures are up less than the $spx or even?
  2. well, this of course is based on a frame of reference of where fair value is, of course.

    GENERALLY Speaking, when institutions want to buy (in general) and get in quickly and/or with good size, futures (S&P pit, etc.) is the way to go.

    futures, IN general tend to lead the indexes, when a bigger move is coming in either direction

    when i see the futures consistently in the upper part of the fair value range vs. the lower part, i know that institutional activity is higher, and they are paying up to get in

    vice versa for the downside

    relationships between indexes and futures, and between various markets (bonds, energy, stocks, etc.) is an aspect of technical analysis that can be VERY helpful for trading, and one that most traders who rely on Macd crosses and other such lagging stuff tend to completely ignore.

    it's good stuff maynard
  3. LT701


    i realize that the fair value level needs to be taken into account

    but i had noticed lately, that on up days that the futures tended to be up more points than the indexes

    and vice versa, on down days

    but i didnt know if it was more than a short term random phenomena
  4. gnome


    No significance. Not exploitable by most players.
  5. Keep in mind that futures trade for 15 minutes after the close of the cash market. So, if someone had great earnings after the cash close yesterday, the S&P futures might close up 2 extra points. The next day, the futures market will appear to be up 2 points fewer than cash simply due to when the sample was taken.

    A better measure, as whitster said, is the PREM, $PREM, PREM.X, or whatever the heck your data source calls it. It measures the premium of the futures contract over the cash index and will fluctuate quite a bit during the day.

    Another point to remember is the premium will vary based upon the time remaining in the futures contract. The premium today, and the premium on March 1st will be substantially different.
  6. it most definitely has significance, and it most definitely should be heeded by NORMAL players

    i am not saying you are going to arb-trade off of fair value divergences as a retail trader. i am saying that paying attention to what institutions are doing is a very good way to improve your trading success in index futures.

    in a nutshell, a big part of my trading philosophy is to fade retail and follow institutional money.

    again, if the futures are consistently smacking the high end of the fair value range (or low end) that is very useful information

    i don't use any lagging indicators. but you can be damn sure i have $PREM on my screen
  7. duard


    Yeah, but.....

    The answer is: It depends...

    As in much of life....

    So, yes, as Whitser says "Maynard, it is worth monitoring," but you need to know what you're looking at.

    Sorry to be cryptic but what you're watching is essentially order balance in relation to cash. A pop can be a great place to jump in or out hence gnome's suggestion as to significance.
  8. futures trade for a lot longer than 15 minutes after cash close.

    depends on the contract

    ES closes earlier than YM

    also note they trade (almost) 24 hours around the clock, reopening in the evening and going all night
  9. futures trade for a lot longer than 15 minutes after cash close.

    YM trades until 4:00pm, ES, NQ, EMD, ER all close at 3:15.

    also note they trade (almost) 24 hours around the clock, reopening in the evening and going all night

    Which was my point. If the close of SPX futures is sampled at 3:15pm today, and the close of SPX cash is sampled at 3:00pm today, then the price change tomorrow may be substantially different.

    Let's say the S&P acts like this:

    3:00pm - SPX cash settles at 1400. SPX futures current trading at 1410.

    3:15pm - SPX futures rally two points on someones good earnings to close at 1412.

    Tomorrow morning, cash opens 2 points higher, but SPX futures already closed 2 points higher the previous night. As a result, SPX cash will be +2 on the day, SPX futures will be unchanged.

    When you *sample* the close can make the move in SPX cash != the move in SPX futures.

    The OP's question was, "when es is up more points than $spx..." I was just pointing out a situation where ES can be up more points than SPX just due to sampling differences.
  10. LT701


    thanks - what is the symbol for this in stockcharts.com, or interactivebrokers?
    #10     Feb 1, 2007