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ES leads YM or reverse?
- Thread starter increasenow
- Start date
great answer...this is kinda what I was thinking...Quote from xiaodre:
okay, I got a little breather while price is chopping. what I mean by it depends is, right now the YM is up 70 and the ES is up 14 points. There's an imbalance there.
But the thing is, the Dow is loaded with heavy hitters, it's a quality index, so you can't just say the YM is going to snap up another 70 pts to match the ES. But the ES is a much thicker index (500 companies) and is much more heavily traded, so you can't just say that the ES is going to come down to meet the YM (like how some people use the EuroStoxx 500 to scalp the DAX because the DAX normally overreacts and snaps back to the Eurostoxx index).
The Dow is too high quality to always snap back like that. Does that make sense?
The balance between the two gives you good information, but it's just information, just another tool.
If you were looking for a lower quality index to match up against the ES, the NQ generally ah sdiht. Gotta go tradE!
thanks guys...while we are at it...which of these do you put more value on as it relates to the ES...meaning, tracking their moves that might move the ES...Crude Oil, 10 Year Note, Gold, Euro, Yen??...DAX?...nah, the DAX seems to track the ES...thoughts?
Quote from babs2000:
Hello cd23,
could you please explain what exactly "YM leads ES" means?
Is it possible to backtest "leads"? If yes:
- what kind of data is necessary for the test?
- do you have a rule set to implement such a test?
Thanks for your answers
The lead and lag thing takes a little understanding.
It comes in about four parts. I'll do them in the order of fineness of measure from coarse to fine.
Leading and lagging is totally off the table during trending. That is because both the YM and ES will be trending together.
Another factor already pointed out is the time constant of their respective variations over time as time series. It corrolates directly with the cash weighted constituents. The futures indexes are parasites of the cash and the cash comparisons of 30 and 500, respectively measure the smoothness of their respective TC's.
The items below only apply during end effects which occur between trending (during the overlap to put it more precisely).
1. 30 seconds to 2 minutes lead of YM over ES at times of change. The are about 7 price locations on chartstimes in addition to the major time which is the overlap and in particular the beginning of the overlap of trends. This window (I call it something else in coding terminology which is not what ET people do) is a really large one and definitely remove the choice of whether to trade YM or ES even if that could come to be a choice for anyone. Trends are annotated with channels and I use the 2 min and 5 min charts respectively. People tell me it is the difference of fractals more that the difference of YM and ES. They can have their views it is fine with me. So for annotating and trading you annotate the YM first and trade the ES and its annotations second. This is new to the OP, he hasn't seen it before.
2. The YM in 1. is lead by the Conners Hayward volatility compression/expansion of a convergence/divergence measure built from the spread difference of the industrials as compared to the premium or fair value (compensated for drift manually). This gives you another 30 seconds plus or minus and the measure starts with the bar compression visually speaking. This is also new to the OP, he hasn't seen it before nor could he display it if he wished.
3. The DOM hundreds postion as it "shows" for a timeout in front of the DOM wall. Manually tab the rate of decline on the wall side of the DOM of the tic just before the wall. It is hard to read this, I know. It is quite technical form of analysis. This is new to the OP, he hasn't seen it before. He probably doesn't have a platform for this.
4. Tics turn at 3. and within the bars of 1. To see this use the leading indicator of tic charts (one for YM and one for ES) which is the volume which shows the dominance shift very early. The later confirmation signal on the volume after the retrace and at micro tic trend BO is the change of volume dominance. This allows anyone to carve about 20 to 40 turns a day to the nearest tic to the extreme tic of the trend ending when the new overlap begins. I do not get the extreme tick more than 50% of the time since I am doing partial fills on the extreme 2 pair of tics. This is because of how I address the driving harmonics at the time, manually. This is new to the OP, he hasn't seen this before. he does not have any feeds for this coming into his computer at this point.
That is a starter comment on how the YM leading the ES works. This can be shown by replacing the crayola with a sharpened color pencil and a straight edge offest one half a lead width on an enlarged whole day tic chart with volume. It takes about 40 pages of excel print outs to take a look at the periodic rows of data related to this for a small portion of the day.
So with a lot of lead time available to the sensory system, it does become possible to trade all the trend extremes as reversals to achieve taking most of what is offered by the market each day.
T28 tells everyone I do not trade. Trading is automatic for me and I just glance at 1 then 2 then 3 then 4 and do a series of partial fills to get the turns*. The fills vary in size so that no one can reverse engineer me (or even coattail me) if they, at the clearing area, are thinking about it (those days are over, years back).
*the reality is that I am visualizing these things a little ahead of time and then they happen just like they did 10 or a 100 thousand times before. As I look at my screens I am just going through repeated confirmations of the sequences that inevitably occur as all other alternatives become closed off as possibilities. This is a difficult multi-degree of freedom concept to come to understand. Read it now and keep it in mind as you make progress towards seeing the markets.
Now your Q's.
Backtesting is an arcane concept. Read Aronson backwards starting with figure 1-1 on page 15. You input with those square waves he shows as the output and you get an output that is a synthesis of 5 degrees of freedom becoming 70 degrees of freedom used in selective subsets that are turned on and off as shown above. Only the subsets in favor become the 5 degrees of freedom use as a rectangular wave output to act upon after the filters before action.
Raw data is necesary you buy it from different sources or you use several platforms that specialize in displaying a lot of critical stuff and then you use scripts to "fix" the displays in order that they convey info. There is a thread of references (30 some pages long) to the many web sites that carry scripts. Wealthlab is an example. There are booklets (75 to 150 pages long on this too). Wedid one every two weeks for quite a while. All are illustrated. The jounal is editied into 150 page booklets every month as well; they are indexed and illustrated with the attachments.
Finally, rule sets. Everything I do here is manual. It is a limitation of my posting as you probably understand and know. Elite trader is largely a collection of amateurs and as such they learn and do things manually. If you go to places like collective 2, you see the outgrowths of independent people who are sort of mechanizing this or that to effect a strategy that may link a thought or two. Commercial stuff is available, apparently to sell products in lieu of making the client money.
For everything I have posted there are about four or five rules.** So far no one has grasped them in the sense that they have been given any utility. I do have a fully automated computer as you can see. It eats five times a day and sleeps at least 6 hours a night. Unfortunately it eyes, lungs and pumping system is wrapping up business these days. The computer works, though and I am going to hang with some penguins next month.
** 1. price change makes money
2. Stay on the right side of the market
3. use the MODE of the market: continue or change.
4. exit=entry so use reversals as profit segments are indicated.
5. front run as a parasite.
All of this was fun to detail out as you can see. Enjoy. Great query.
it doesn't really matter when the Fed blindsides you with that annoucement about the auction of available funds (Weds 8am central) and you lose 10 handles in SPU in 9 seconds! To answer the question you should watch spu as it relates to 5 and 10 yr yield (Cash)not futures.
sigh...
the YM is price weighted. the ES is cap weighted. so, saying "well the ES is made up of 500 stocks" ignores the obvious.
cap weighting means (do the math), a very small %age of the 500 stocks accounts for a VERY large percentage of the S&P on a notional basis.
the YM is PRICE weighted. this means it is weighted differently.
but saying that the ES is an index of 500 stocks without taking into account weighting, fails to address how the indexes are ACTUALLY computed.
if you doubt this, feel free to compare the SPEWI to the S&P
the YM is price weighted. the ES is cap weighted. so, saying "well the ES is made up of 500 stocks" ignores the obvious.
cap weighting means (do the math), a very small %age of the 500 stocks accounts for a VERY large percentage of the S&P on a notional basis.
the YM is PRICE weighted. this means it is weighted differently.
but saying that the ES is an index of 500 stocks without taking into account weighting, fails to address how the indexes are ACTUALLY computed.
if you doubt this, feel free to compare the SPEWI to the S&P
Mine was a simple post that did not take much of anything mechanical into account while responding. I really didn't want to go into the intricacies because the OP and responses to my post were simple.
But however simplistic, my point stands. The correlation and divergence between these two indices (and the NQ) and the resulting price action is worth studying.
And the YM doesn't always lead the ES. They alternate depending.
So would you like to provide some methodology for study, Whitster, or were you just throwing rocks?
But however simplistic, my point stands. The correlation and divergence between these two indices (and the NQ) and the resulting price action is worth studying.
And the YM doesn't always lead the ES. They alternate depending.
So would you like to provide some methodology for study, Whitster, or were you just throwing rocks?
Quote from whitster:
sigh...
the YM is price weighted. the ES is cap weighted. so, saying "well the ES is made up of 500 stocks" ignores the obvious.
cap weighting means (do the math), a very small %age of the 500 stocks accounts for a VERY large percentage of the S&P on a notional basis.
the YM is PRICE weighted. this means it is weighted differently.
but saying that the ES is an index of 500 stocks without taking into account weighting, fails to address how the indexes are ACTUALLY computed.
if you doubt this, feel free to compare the SPEWI to the S&P
all indicators may tell you for your moment in time if the market is cheap or rich, when any of you out there learn Market Profile and how paper interprets it that will give you an indication of where buyers and sellers pause and fight over areas so you can adjust your entry and exit points. The YM has in my experience of trading has always been a lag to the SPU. This changes from time to time but right now both markets are moving so fast that you have to have a macro prospective or you get run over, they take the SPU up or down 4 or 5 handles within a minute or two so if you can not recognize areas of interest you are gambling and not trading. This relates to where treasuries are and where yield is everyone (paper) is spreading all markets against each other with this extreme volatility and understanding these flows will help with you in any futures trade right now whether that be energy, indexes or treasuries. I trade all three categories and know from getting hurt and making money in these markets the last 2 months.
"And the YM doesn't always lead the ES. They alternate depending."
actually, i would argue the ES more often leads the YM than the other way around.
but i pay more attention to the correlation between MANY markets - bonds, smallcaps, large caps, commodities, institutional vs. small trader action, etc.
"So would you like to provide some methodology for study, Whitster, or were you just throwing rocks?"
i don't provide free methodology, although i am more than willing to provide some generalizations.
most traders (and most traders lose) who trade YM/ES concentrate on what i refer to as "squiggles on the page". iow, the chart. thus, to gain an EDGE, it is helpful to look beyond the chart.
i agree with another poster here that market profile helps provide an edge. but MP is not a trading system, nor is it an indicator which means it is not "sexy" for 99% traders who would rather rely on the mac-stoch-rsi-movingaverage-123-superneato keen indicator.
actually, i would argue the ES more often leads the YM than the other way around.
but i pay more attention to the correlation between MANY markets - bonds, smallcaps, large caps, commodities, institutional vs. small trader action, etc.
"So would you like to provide some methodology for study, Whitster, or were you just throwing rocks?"
i don't provide free methodology, although i am more than willing to provide some generalizations.
most traders (and most traders lose) who trade YM/ES concentrate on what i refer to as "squiggles on the page". iow, the chart. thus, to gain an EDGE, it is helpful to look beyond the chart.
i agree with another poster here that market profile helps provide an edge. but MP is not a trading system, nor is it an indicator which means it is not "sexy" for 99% traders who would rather rely on the mac-stoch-rsi-movingaverage-123-superneato keen indicator.