Market Internals

[syswizard]

Guys - just wanted to get everyone's opinion on this (and I am sure it's been discussed before):
As far as metrics, which one leads ? Futures or Cash ?
So is there any advantage for looking at $Tick or $TickQ in the cash indices vs. the comparative internals in the futures markets (ES, NQ, etc) ? These metrics would include Upticks-Downticks, UpVolume-DownVolume, Inside BidSize - AskSize.
My contention is that the futures metrics lead the cash and are more reliable to use in a trading system.
What say ye ?

 

[Overnight]

Guys - just wanted to get everyone's opinion on this (and I am sure it's been discussed before):
As far as metrics, which one leads ? Futures or Cash ?
So is there any advantage for looking at $Tick or $TickQ in the cash indices vs. the comparative internals in the futures markets (ES, NQ, etc) ? These metrics would include Upticks-Downticks, UpVolume-DownVolume, Inside BidSize - AskSize.
My contention is that the futures metrics lead the cash and are more reliable to use in a trading system.
What say ye ?

During RTH, cash leads. During ETH, futures lead. Best guess from me.

 

[tradeking007yahoo]

Opinion only...i would say they flip based on which one the hft arbs are gunning for the fastest to profit or whatever execution algo os at work to make an advantageous price for their customers.

common sense would say its probably more efficient and faster to trade in a futures mkt with price discovery and no time spent checking on locating short sales or checking on best price in 30 dark pools versus 1 exchange in the sp500.

 

[M4-1]

Guys - just wanted to get everyone's opinion on this (and I am sure it's been discussed before):
As far as metrics, which one leads ? Futures or Cash ?
So is there any advantage for looking at $Tick or $TickQ in the cash indices vs. the comparative internals in the futures markets (ES, NQ, etc) ? These metrics would include Upticks-Downticks, UpVolume-DownVolume, Inside BidSize - AskSize.
My contention is that the futures metrics lead the cash and are more reliable to use in a trading system.
What say ye ?

there can be a slight advantage gained by monitoring the NYSE Tick..but it must be charted a certain way so that you can observe "where it is coming from"

ES Futures will always lead..is my opinion..as the idiots that throw OPM around don't give a damn what happens in the short term..once the "box" makes a profit in so many days..the drawdown on some of these algos can be enormous during certain market hours..and when they all line up..which they do at times..look out..if you are on the wrong side of the trade when this happens..big losses can materialize very quickly..even when trading the MES !!!

 

[Overnight]

and when they all line up..which they do at times..look out..if you are on the wrong side of the trade when this happens..big losses can materialize very quickly..even when trading the MES !!!...big losses can materialize very quickly..even when trading the MES !!!

Like a swing trade.

 

[Real Money]

Depends what's happening in the market.

The basis spreads trade in both directions. But, the lower the VIX, the better the futures will lead market moves.

Basis spreads

NQ - NDX
ES - SPX
RTY - RUT
YM - DJX
​

can be used to front run big action coming out of GLOBEX/ECBOT, but it doesn't always work like that. There's the index spread bid, dealer hedging, and then the return swaps book to think about.

Internals can aid in timing a move, but implied vol is the best thing I know of. $TIKI is kinda cool, and UPVOL/DOWNVOL seems reliable.

 

[M4-1]

Depends what's happening in the market.

The basis spreads trade in both directions. But, the lower the VIX, the better the futures will lead market moves.

Basis spreads

NQ - NDX
ES - SPX
RTY - RUT
YM - DJX
​

can be used to front run big action coming out of GLOBEX/ECBOT, but it doesn't always work like that. There's the index spread bid, dealer hedging, and then the return swaps book to think about.

Internals can aid in timing a move, but implied vol is the best thing I know of. $TIKI is kinda cool, and UPVOL/DOWNVOL seems reliable.

can you elaborate on return swaps book..thx

 

[Real Money]

can you elaborate on return swaps book..thx

I meant OTC index products designed for institutional clients, i.e. structured products.

It's called the delta one desk at an investment bank.

Also referred to as "synthetic equity" or total return swaps (TRS). The banks buy or sell structured to investors, bank clients, or hedge funds and then hedge the risks in either listed or OTC markets. Trades in units of like 10mm notional and up.

 

[M4-1]

I meant OTC index products designed for institutional clients, i.e. structured products.

It's called the delta one desk at an investment bank.

Also referred to as "synthetic equity" or total return swaps (TRS). The banks buy or sell structured to investors, bank clients, or hedge funds and then hedge the risks in either listed or OTC markets. Trades in units of like 10mm notional and up.

ok..i don't really worry about things like that..to be honest..i have tested a good deal of charting software to look at short term movements using order flow analysis..all from AMP futures offerings..and after many many hours of comparing the results to my own way of looking at what is happening..as in reading the charts..i came to the conclusion that it is all of no use to the small retail trader..the reasons why do not matter..it is only the outcome that matters

hence..my take on the small retail trader trying to compete or "copy" the "pros" is just another chapter in the never ending "ways" that the industry comes up with to keep the cogs turning

one "guru" in Australia..i think..who is a professed expert on Gann..hmm hmm..used to say "it is like picking up candy from the ground"..he might have been over simplifying it a bit..but he had the right idea in that it is far better to sit back and wait for "low risk" entries than to try and jump in and out with the "pros"

my experiences has led me to believe that the biggest obstacle any trader faces is oneself..sort that out.. and as RN says in his bio..something like.."the idiot clicking the mouse..and managing risk"..never a truer word spoken..

btw..does anyone here know what ever happened to Redneck..aka RN..he seems to have disappeared in 2016..i hope nothing has happened to him..healthwise..that is?

 

[Laissez Faire]

Guys - just wanted to get everyone's opinion on this (and I am sure it's been discussed before):
As far as metrics, which one leads ? Futures or Cash ?
So is there any advantage for looking at $Tick or $TickQ in the cash indices vs. the comparative internals in the futures markets (ES, NQ, etc) ? These metrics would include Upticks-Downticks, UpVolume-DownVolume, Inside BidSize - AskSize.
My contention is that the futures metrics lead the cash and are more reliable to use in a trading system.
What say ye ?

Please correct me if I'm wrong - but is not all market internals based on the cash index/components? I.e., NYSE TICK is calculated from upticks/downticks on NYSE listed stocks?

I haven't made any decisive conclusions yet, but it's my impression that all these relationships and spreads are fleeting and inconsistent, so I'm questioning the value of using them in real time as you want something which is actionable and which delivers consistent results. If it only works some of the time? What's the use? Of course, you could use it to be very selective, i.e., only trade when everything lines up perfectly. But that will also mean that you'll miss out on a lot of action.

I do plot the NYSE TICK and surely it can offer some interesting signals at times, but I may decide on simply erasing it from my charts. I look at the Up/Down volume too. Prior to this year, divergences/convergences with ES/NQ often offered very valuable clues, but as they decoupled earlier this year the value have been greatly diminished.

Then you have Hershey's claim (and many of his students still insist on this today) that YM always leads ES. Clearly not the case.