40 point premium in YM

[polpolik]

Quote from flipflopper:

Thanks macal that was exactly the type of educated response I was looking for.

Too bad we don't have more posters like you.

you're not gonna get an educated response when you refer to YM having a premium of 40 over ES because they're trading about 40 points off.

I think you ought to say YM/ES divergence. You don't compare the points up/down of YM to ES and refer to it as a Premium of one over the other... cause it isn't.

 

[Surdo]

It is fair to refer to the 87 point difference between YM trading @ 13704 and INDU trading @ 13617 as a "Premium".

The difference between CASH and Futures is referred to as "Fair Value "or "Premium" in the S & P from an Arb standpoint.

The OP was not comparing Apples with Apple futures!

el surdo

 

[Pekelo]

Actually, the OP is right and his question is valid. The Dow and the S&P used to move in tandem and for 100 Dow points move you got about 10 S&P move. The difference usually was less than 5% during last year.

Since this year February or so, the SPX has got more volatility thus now the SPX is moving more by 20-30% depending on the day. Today right now the SPX is down .47% and the Dow only .27%


Now I am not sure about the reason, but the observation of the OP is valid....

 

[polpolik]

Quote from Pekelo:



Now I am not sure about the reason, but the observation of the OP is valid....

His first post (and the subject line) referring to YM having a 40 point premium over the ES is what got everyone on his ass. oh well, let's all move on

 

[Bogan7]

Quote from flipflopper:

I am aware of how the figures are generated but in general they move in sync. Yesterday the ES was up about 1 and the YM was up about 40.

In general when market is strong people buy all stocks including DOW and S&P 500. If one is stronger or weaker then the other it is usually attributed to huge news in one or more of the DOW stocks. I can't see a reason for this premium just trying to see if anyone else had some insight,

Yeah they may in general but there is NO reason for them to as they have a differing calculation method and are composed very differently. There is no real reason behind it you are measuring apples and oranges just because they both grow on trees means little.

 

[Pekelo]

Quote from Bogan7:

There is no real reason behind it you are measuring apples and oranges just because they both grow on trees means little.

Just because I am a dick and also I like to be correct, I will prove you wrong.

Between the mid-July low and year's end the Dow moved 1900 (10700>12600) points compared to the S&P's 200 points (1230>1430). That is pretty much 1:1 move, just like I stated in my post above.

So explain it to me, if they were apples and oranges, how come they moved together last year?

P.S.: I will actually prove myself wrong, because over longer periods, even this year they move the same range:

Consider from the mid-March low to until yesterday:

SPX 1365 > 1530= 165 points
DJX 12000 > 13600 = 1600 points

But on a daily base the SPX seems to be more volatile....

 

[flipflopper]

Quote from Pekelo:

Actually, the OP is right and his question is valid. The Dow and the S&P used to move in tandem and for 100 Dow points move you got about 10 S&P move. The difference usually was less than 5% during last year.

Since this year February or so, the SPX has got more volatility thus now the SPX is moving more by 20-30% depending on the day. Today right now the SPX is down .47% and the Dow only .27%


Now I am not sure about the reason, but the observation of the OP is valid....

Thanks Pekelo. I should be more clear and proper in my wording statements and questions... I assumed the question was simple and that there actually was a simple reason for the difference.

I called it a premium because on Friday I wanted to start getting short the market for a longer term swing trade and I could have picked the ES or YM. Since I trade the YM (and was already holding a losing short that turned into an "investment") I figured I could pick either and be ok. Moving forward I will do half YM and half ES. So as not to pay a "premium" by picking the stronger or weaker of the 2 markets.

 

[Bogan7]

Quote from Pekelo:

Just because I am a dick and also I like to be correct, I will prove you wrong.

Between the mid-July low and year's end the Dow moved 1900 (10700>12600) points compared to the S&P's 200 points (1230>1430). That is pretty much 1:1 move, just like I stated in my post above.

So explain it to me, if they were apples and oranges, how come they moved together last year?

P.S.: I will actually prove myself wrong, because over longer periods, even this year they move the same range:

Consider from the mid-March low to until yesterday:

SPX 1365 > 1530= 165 points
DJX 12000 > 13600 = 1600 points

But on a daily base the SPX seems to be more volatile....

Knock yourself out, why not pick a longer period to make it a bit more valid

 

[whitster]

the observation of the OP is valid as an analysis, only if you have a myopic viewpoint

many (usually losing ) traders extrapolate from recent history to generalities

perfect example is the crude/stock correlation

last year and for a bit before, oil prices and indexes were roughly negatively correlated.

this led every junior trader to think higher oil = lower indexes etc.

anybody with historical perspective knows that in the LONGTERM higher crude correlates with higher stocks. iow, it's a positive not a negative correlation

we currently have crude near 73. up 20 pts (a massive percentage move) from its lows.

YET we have indexes near high

and maybe some traders will learn

similarly, the correlation between ES and YM FLUCTUATES. it cycles based on a host of factors. frankly,a more important correlate is the SPEWI vs. S&P but few traders even know what the SPEWI is. the correlation and divergences are MUCH more important for considerations of market breadth