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Had you said that on many occasions the tail _tries_ to wag the dog, I would
agree. This happens routinely with the futures reflecting premium or
discount appropriate to the direction in which the futures pit believes the
cash market will move. However, the premium or discount are constantly
subject to reality check with the direction of the cash market. The
difference between fair value and premium is characteristic of options. One
of the functions of the futures market is to anticipate moves in the cash,
however I think it is dangerous for traders to believe that the futures
market leads the much larger and much more diverse cash market.
Earl
-----Original Message-----
From: Ira <ist@xxxxxx>
To: eadamy@xxxxxxxxxx <eadamy@xxxxxxxxxx>
Cc: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Saturday, January 30, 1999 10:06 AM
Subject: Re: Dow Jones Industrials Futures
>On many occasions the tail wags the dog. The SnP future will start its
move
>before the indexes. That is why the premium expands. A prime example
would be
>what happens in the morning when the night session takes the future down or
up
>several points. It could be the hedge funds, the arbs or anyone else, it
>doesn't make any difference, when the price moves you either make or lose
>money. Ira
>
>Earl Adamy wrote:
>
>> I suppose this is subject to some interpretation, however I'm of the
opinion
>> that wherever the dog (cash market of s&p stocks) goes, the tail
(futures)
>> will follow. This is not to say that there is not arbing of cash to
futures
>> which shows up in the premium differential to fair value and that the
>> size/direction of that differential is not, at times, a good indication
of
>> market direction. Also, one should keep in mind that only a small
percentage
>> of the pit trades are reported via real-time feed and that those reports
lag
>> the actual trade by the time required for the pit clerk to manually enter
>> the trades.
>>
>> Earl
>>
>> -----Original Message-----
>> From: swp <swp@xxxxxxxxxx>
>> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>> Date: Saturday, January 30, 1999 8:15 AM
>> Subject: Re: Dow Jones Industrials Futures
>>
>> >The futures prices tend to lead the cash market, at least in the S&P
>> >500. I assume it is also so in the Dow.
>> >
>> >Steve Poser
>> >--
>> >Steven W. Poser, President
>> >Poser Global Market Strategies Inc.
>> >http://www.poserglobal.com
>> >
>> >> Brendan R Smyth wrote:
>> >>
>> >> Is it feasible to day trade DJI futures contracts by monitoring price
>> >> movement on the actual index with e.g. a 1-minute bar chart or do you
>> >> need to monitor price movement on the contract you are trading?
>> >>
>> >> Anyone with comments or advice appreciated
>> >>
>> >> Brendan Smyth
>
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