Can the ETF or stock Index be used as a leading indicator for intraday stock trading?

I was told that S&P futures can be used as leading indicators when day trading stocks. However, I do not have access to Futures through my broker. As an alternative, can I use the Spy (ETF) or the SPX (S&P Index) as a leading indicator when day trading stocks?

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This entry was posted on Friday, July 30th, 2010 at 12:24 am and is filed under Stock Ivestment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Can the ETF or stock Index be used as a leading indicator for intraday stock trading?”

1. financegal27 Says:
   July 30th, 2010 at 12:28 am

   No. The reason the future is a leading indicator is because it is an indication of future expectations for the index, in the case of the S&P the futures are way investor’s express their sentiment 3-months, 6 months, or 12 months in the future. A futures contract is an agreement to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. That is why its a leading indicator. An ETF or Index is a current value today. Its not indicating anything, but the time you know what its done you’re looking at the past value.

   If you are simply using it as an indicator you’re looking for it as a trigger to make a decision you aren’t actually buying the future, you can easily follow these futures contracts on the CFE website:
   http://cfe.cboe.com/Products/Products_VT.aspx
   http://cfe.cboe.com/Products/Products_VA.aspx

   All that said I highly recommend really learning as much as you can about the market and trading before you do start day trading, most day traders lose a lot of money because they don’t really understand the market, and the very small number that make money do it as a profession and have tremendous access and knowledge on building models and understanding technical analysis.

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