Following the Leader

WHO’S IN CHARGE

You may be a bit confused by trying to find a possible market leader. Which index leads the world markets? The Dow Dones Inustrial Average ($INDU), cash ETF (DIA), or its futures (YM); the S&P 500 index ($SPX), cash ETF SPY, or its futures (ES); or the Dollar Index or futures ($DX)? One of them always leads- but not ther same one every day:)

Thats the trick in day trading. How do you know which one? One easy way we’ve found is to see which one is reacting precisely to support and resistance levels early on in the trading day. This will help you identify important bottoms, tops, and turns in the entire market and related markets. The first step is setting up your screen(s) so that you can monitor the indexes, futures, and ETFs in a way where you can see at a glance how all of them are reacting to certain levels. This is the beauty of our “Eye on the Market” setup. We’ll spare you the details of how to do that here. For now, take a close look at the following $SPX S&P 500 index intraday 5 minute chart. See how it reacts to the pivot line early on? It reacts more precisely than the $INDU, DIA, SPY, YM,and ES. We may have a winner!


S&P 500

Now the $SPX is on our radar. Our Gann cycle and turn time comes up with 11:30am CST as a precise turn time, so we are now watching ther $SPX for the price bottom. We shoot past range on the $INDU, ES, YM, DIA, and SPY. But we just make it there on the $SPX (pink line in chart above). The entire market was waiting for this to hit range to bottom! Now lets check it against another support level we hope you noticed. The 50 day moving average. All the other indexes, futures, and ETFs shot way past theirs- but the $SPX almost stopped dead on it. Again, the market waited for the $SPX to hit the crucial support before turning. Take a look for yourself in the following daily chart of the $SPX. the red line is the 50 day simple moving average.


$SPX index

Finally, let’s look at the futures- the ES contract. In the following intraday, 5 minute chart we see how it shot through range then bottomed only after the $SPX parent index approached range. Then it turned and shot up, up up! You could have traded the ES, YM, SPY, or even the DIA. Didn’t matter. What matters is finding which one leads and which one the market is waiting on to turn!

ES futures day trading


DISCLAIMER: The examples above are given as demonstrations of technical analysis and are therefore hypothetical and not actual trades. They do not represent actual account results nor include the entirety of all predictions we make.

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