Below is a chart that shows the premium between the S&P 500 index and the near month ES contract.
I watch this spread religiously and there was a huge amount of strange things going on this morning. If you were trading it, I’m sure you noticed the manic swings this morning. What does it mean? It means that there isn’t just a little disagreement on direction, it means there is TITANIC disagreement and traders, algos, HFTs, et al, are pushing (in both directions) with all they have with enough firepower (e.g. $$’s ) to dislocate the premium spread for short periods of time. Very interesting to trade this today.
Be careful, we could see an explosive move in either direction. I know, I wish I could pass along the direction. But knowing we could run hard in one direction you can be better positioned with stops, reversal setups, etc.
-EyeWall
