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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Robert J. Partridge who wrote (27568)	9/28/1999 9:23:00 AM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 99985

Futures are like options in that they have a time premium built in that decays. Therefore, the futures trade at a higher price than the SPX. As of this morning, the premium is around 13.26 so an SPX close of 1283 would equate to futures price of SP9Z of 1296. Now if futures are down to 1291, that means that when the market opens this morning, the SP 500 cash market or SPX has to drop 5 points to be at fair value or else the big money could scalp the spread and make lots of money. You use the futures to gauge what the opening is going to do as far as up or down since if the SPX moves, the underlying stocks will likely move in the same direction as the stocks that make up the SPX are sold and bought. This also starts momentum in other stocks as many people gauge the strength or lack there of by what the indexes are doing. Hope this clears things up. PS - CMGI pre trading at 95, not much of a pop for record earnings. Good Luck, Lee