Which one leads, index or future?

Quote from kowboy:
Is there software available that plots and shows the difference between the futures and the cash market in real time?
More...
For the S&P futures, just plot the $PREM symbol. It's the premium between the cash and futures.

As far as which one leads the other - neither one. That is, neither one always leads the other. You have a complex arbitrage going on betwen the cash/equities, the related ETF, and the futures - e.g., for the S&P you have a constantly changing dynamic between the SPX (i.e., the value of the underlying stocks that compose the S&P500), the SPY (the ETF that tracks the SPX), and the S&P futures. You also have some pit vs. globex arb going on too.

So at any given moment, the action of one of the three can produce reactions in the other two. Which one that's leading the action in the related securities changes throughout the day. A good idea is to watch the relative support/resistance on the connected symbols - a lot of times one of them will be hitting a key intraday resistance or support level while the others aren't yet but the others will end up stalling anyway.
 
Quote from vhehn:

interesting but i cant make out the form clear enough to understand it. can you make it bigger and clearer? tia
More...

Just save the image then open it in Imaging or Paint. You can make it as big as you want. Looks like one of Miro's sketches:)
 
Quote from etherboy:

I'm new to futures, and just started trading.

Can anyone tell me which one leads? The index, or the future? Like if DOW index keeps going up, then futures (Let's say YM) should be up too? Or sometimes futures lead? How do I decide? Do I watch future alone or should I watch both?

Is it that futures lead before market open, and indices lead after market open?

Can someone enlighten me?

Thanks.
More...

Hi etherboy,

Sufficiently enlightened now? If you need any further help, let us know.

Be good,

nononsense
 
Quote from kowboy:

Is there software available that plots and shows the difference between the futures and the cash market in real time?
More...

Yes, it is a killer. And very simple.

Do you have qcharts? If so I will explain it to you and give you an illustration.

Nitro'squantification will stall out like a sore thumb. Further you will see that the 15% is usually headed directly for a failure. This means that the smart money does not go for what the cash market is indicating (the leading to a place). When this failure materializes the futres smart money ios sitting not have taken the bait and is positioned properly for the "recoup" from this most recent failure.
 
Quote from vhehn:

interesting but i cant make out the form clear enough to understand it. can you make it bigger and clearer? tia
More...

I have attached the original word blank sheet file.

THe path of the indu and ES94H (numbered 5 min bars, 1 through 81 of ES) is at right. This is where you see the trends rise and fall.

the INDU data (price) is in 10 point increments. I put prior close in the middle Measured vertically) as a starting point. See bar "1" dot. This ine ran down so i glued (Glue stick) another sheet to the bottom and moved top down ( cut off excess) to print here.

There were 24 trades on ES that day. the bar 15 35 and 44 trades are shown as circled data and a horizontal line across linking them.

Once I have the Squ (squeese) and STR (stretch) set up for the day, I am golden for making money continually.

As you see the INDU moved over a range of 140 points. Many advances and retraces. Since each bar is 5 mins,you can see that most moves took long times. It is like slow motion.

A beginner doesn't make all that is possible. But nettting 17 % on a gross of 35%(he bought the spread 24 times at a cost of a tick each (6 points worth)). To net 362.50 on a margin of 2000 dollars for 1 contract is a good days work as a beginner.

Using the INDU and YM04H offset as a leading indicator of ES04H makes this possible.

I will show you how to do the setup on Qcharts that makes this automatic if you hve Qcharts.

The basic situation for making money is to have an open mind to opportunities. Once you have a chart to fill in and a graph that corroberates everything, there is little of no emotion or thinking involved. The best example would be like driving a car. It is like tooling down roads and observing the traffic and road conditions.

Any pussy can drive a car.
 

Attachments

Quote from easyrider:

Just save the image then open it in Imaging or Paint. You can make it as big as you want. Looks like one of Miro's sketches:)
More...

Thanks.

It is so funny here that guys like trend fader just keep posting brain farts.

What would happen if he actually could understand something.
 
Quote from ArchAngel:

As far as which one leads the other - neither one. That is, neither one always leads the other. You have a complex arbitrage going on betwen the cash/equities, the related ETF, and the futures - e.g., for the S&P you have a constantly changing dynamic between the SPX (i.e., the value of the underlying stocks that compose the S&P500), the SPY (the ETF that tracks the SPX), and the S&P futures. You also have some pit vs. globex arb going on too.

So at any given moment, the action of one of the three can produce reactions in the other two. Which one that's leading the action in the related securities changes throughout the day. A good idea is to watch the relative support/resistance on the connected symbols - a lot of times one of them will be hitting a key intraday resistance or support level while the others aren't yet but the others will end up stalling anyway.
More...

This is what's called a "practical" explanation. Notice how simple it is, how easy to understand. Imagine how little effort it would take to put its points into practice and realize a profit from having done so.

Then, of course, there's Jack's "explanation" . . . . . :cool:
 
Nitro's 85%/15% is a pretty good rule of thumb.

One of the big reasons that futures lead is that when the big stock fund shops get a bundle of cash that they must invest that day, the first thing they do is buy the futures in order to participate in any move. This way they are not forced to buy stocks in single big blocks in a limited timeframe. They then scale into stock and out of the futures. (The same things apply when they are selling).

Of course this is a simplistic scenario/example I am describing and there is alot more to it, but the general concept applies.

That is all.
 
Sorry, Grub. Nitro is correct. Often you will see the cash start to move (up for instance) and the premium contract as the futures participants don't believe it is the actual start of a move. As soon as they realize there is more money coming in, the futures will catch up and the premium will expand. The opposite is the norm but it does happen this way fairly often (yeah, I would say 5% or 10% of the time).

The normal way is when big stock buyers buy the futures first then start buying the equities they intend to acquire. When they are through (and the market probably moved up on their stock buying) they close their long futures hedge. That operation is one reason the futures usually move first.

Then there are the program trades which can kick in and spike the market when the premium gets too high or too low. Sometimes the program spike marks the end of the move, other times it doesn't.

Quote from Grob109:

...............Nitro'squantification will stall out like a sore thumb.......................
More...
 
You must log in or register to reply here.
Back
Top