Tick charts for SP

The Fair Value, although calculated using the previous days closing prices is basically constant for that next day's trading. Assuming there is 2 points added to the spot price of the S&P 500 index (to get to "fair value"), then if the futures are trading at 5 points over the spot price, then you see a 3 point "premium" which will have to either translate to an upswing in the underlying (500 stocks), or an immediate downturn in the futures. Since the floor traders and institutions are constantly hedging, this result is consistent.
 
Don is right, the premium is crucial to trading the futures, but it takes a lot of experience to handle it. In a sense, it is like watching a band penetration--does that signal a breakout or is it just overbought? Sometimes a high premium just means futures are expensive, other times it means a buy program is on the way. In general, I would not look to short a big premium, a buy program could bury you. Same with small premium, only reversed.

I used to follow tick charts on S&P futures, as early TradeStation did a nice job with them. Now I don't and don't miss them at all. You get the bid/ask size on the globex and time and sales is better way to follow individual trades if you feel you must. A tick is one trade, it could be a one lot or 500 cars, you have no way of knowing, so they can be misleading. Also, there is no way all the trades in the pit get on the tick chart, so again it is misleading.
 
This is probably a stupid question, but why is there no way all
the trades in the pit cannot get on the tick chart? Is there just
too many?
 
But since we are not seeing the depth or size of the trades (actually we do "hear" many of them on the CME squawk box), you will only see the price of the trades. I have modified my new (test) software so that I don't get "flat-lined" when the trades are done at the same price. Some like seeing the flat line, I do not. Anyway, you won't see all the trades, just the differnet price ticks.
 
The pit traders dont take turns doing trades so they can be properly noted by the pit reporters. In an active market there may be many trades that dont get punched in and in a fast market may get worse than that. Thats why pit audio is used by many since these guys know what to look for and relay it.

The e contracts are a different story since time and sales is probably exact info. Thats what I would watch.

My personal preference for tick charts was to use multiples of FIB numbers since everyone can use 100, 200 etc. I just like to be different.
 
Just to clarify, my comments on tick charts were regarding the electronic minis, not the full contract. I haven't used them on the full contract due to the limitations mentioned by AAA. Just another example of the inefficiencies of an open outcry market.


Kirk
 
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