Where Will The Markets Open? by Ihor Vysotskyy
Here’s how you can use fair value to determine where the
market will open.
Turn on CNBC before the market opens and you
will see the S&P futures quotes. How important
are they? If you are an experienced trader,
you know that the Standard & Poor’s 500
futures contract, which is based on the S&P
500 index, is a valuable forecasting tool. But what exactly is the connection between the S&P 500 index
and futures on this index, and how can this connection help
define where the market will open?
FUTURES VS. CASH
The S&P 500 is a capitalization-weighted index with an
aggregate market value of 500 companies that represent
major industries. The S&P 500 futures contract is a commodity
contract based on the S&P 500 cash index. It represents the
“obligation to deliver” the value of the index on a certain
future date (the expiration date).