"specialists" and eminis

[bertg 10]

Hi,

 

Here I am trying to learn this and that in Technical Analysis, while I feel like there are some basic questions I must have answers to first (maybe putting the carriage in front of the horses).

 

I am at the beginning of my second of three Richard Ney books. Fascinating stuff.

 

Who, if anybody, marks up and down the price in E-minis, since there is supposedly no specialist trading with his accounts) interests involved? From the CME manual I read: "There are also products, such as the CME E-mini stock index contracts, that trade only electronically and never via open outcry."

 

Then, if I understand Tom Willams correctly, the cash market leads the futures. But in the S&P 500 "cash" market there are 'specialists,' so in the end is the ES marked up/down by their interests? Which leads me to this question: what does S&P "cash" mean? How does the S&P 500 "cash" value move up and down? It's the performance of the 'specalist-manipulated' stocks that make up the index right?

 

I would appreciate help from anybody on this. I know some of the folks in the VSA thread are familiar with Ney, Wyckoff, Willias writings and their answers would be appreciated.

 

Thank you,

Bert

 

P.S. The use of the word "specialist" is what I understand Ney's is: to describe the specialist on the exchange floor that has no regard for true supply & demand and marks the price up & down, sells short, etc., all with the purpose of putting money in his account(s).

[Tasuki 10]

Bert,

The relationship between the cash and the futures is a fairly complex one. The "cash" simply means the $SPX index. Big hedge funds and Prop firms are able to buy and sell each and every stock in S&P 500 with huge computers and huge accounts, so in this way they can actually trade the index, or rather, the stocks within the index. Arbitrage traders look for imbalances between the cash index and the futures (full contract or emini) and they will buy the cheaper and sell the dearer. In this way, the cash and futures are always dancing close to each other and taking turns as to which one leads.

 

A further level of complexity involves the locals in the S&P full contract pit, who can and do buy and sell the eminis to square their positions when they get caught long or short.

[SunTrader 10]

Not to mention there are also traders at screens right off the pit itself that are arbing the big contract with the emini continuously.

[BlowFish 10]

Be very interested to hear how you get on with Ney. I can't help wonder if there is more to 'uncover' in his books. I did Joel Pozens course a while back (he appears to have stopped running it now). Apparently it was Ney who taught him to trade.

 

Cheers.