E-mini Bid/Ask movements

[Pabst]

Originally posted by Aaron


I say it doesn't matter unless you are going to try to arb them. All three are going to move together.

A more interesting question -- one that you can actually make use of and profit from if you can find it -- is what market leads another dissimilar market? Does the Nasdaq lead the S&P? Does the Dow lead the S&P? Does MSFT lead the Nasdaq? Or Nasdaq lead MSFT? By "lead" I mean a move in one is followed by a move in the other in a predictable way.

Of course all of these markets are correlated and most of the moves they make will match coincident moves in the other, but are there any lagged moves? That would be useful to find.

Aaron, except for a few TA setups (none of which work, but I'm a chronic) trading off relationships is really my most viable M.O. I trade NQ and ES almost equally, and key on various componants. Differs depending on circumstance. Leadership between futures and the underlying changes constantly. Depends on whether moves are broad based or because as often, from one or two stocks(earnings, downgrade, ect.) What does not work is thinking that because ES is rallying NQ must catch a bid. Apples and oranges. Analogy would be that Corn and Soybeans are both grains and move in the same direction most of the time, but there are many days they don't. Surely I don't need point out how many times you see ES up 7 and NQ down 12.

 

[dgabriel]

Its a great question how the markets are correlated and what leads.

I know that SP traders in Chicago watch big caps carefully, MSFT, GE, CSCO, JNJ, etc.

I am curious how much the use of futures as hedging instruments by large funds plays a role in their movement.

 

[stock777]

Originally posted by damonjanis
My observation is that there are times (a day or part of a day) when one stock or index seems to lead another, then for no apparent reason the correlation disappears . I could never figure it out in a way that made sense to me, that I could profit from, so I dropped it.

Might have to do with a temporary size buyer/seller in a particular venue. When they finish, that's the end of the 'lead'

 

[stock777]

Originally posted by Aaron



Yeah, good observation, Stock777. I was surprised when I first noticed this myself. My best guess is that it is automated arbitrage orders that are quickly pulled if the arbitrage disappears. And they have to be automatic and computerized because no human can be entering and pulling orders that fast. What do you think?

No question. Of course, the orders are real, and if you wanted to do a 400 lot you could. Might be some size limit for one entity, but the liquidity is there. But they are fast.

And what kind of arb is it that works reliably at the 2 cent level after fees and slippage?