Do the share horses pull the index cart?


Legendary member
Hi all,

A question that has bothered me for years.

Essentially ta is the study of supply & demand. In asides to some posts I have posed the question as to why ta works on an index since the index has no supply & demand of its own (you can't buy shares in an index) but merely reflects the aggregated supply & demand of its constituents. Thus, the share horses pull the index cart.

Supply & demand of an individual share is affected by market sentiment (the most important) and by factors distinct to that share. However, our gauge of market sentiment comes primarily from looking at what the index is doing. Thus, the index cart pulls the share horses.

A nifty paradox?

Does it matter?

Good trading

You're forgetting that at the top of the pile are futures. :D

Stocks follow the indices, and the indices follow the futures.

There's supply and demand in futures, so the indices are just the filling in the sandwich. :cheesy:


Well-known member
Blimey... Carts, horses and sandwich fillings- whatever next.

I agree in the main with Skim. But what drives the demand and supply in the futures markets?

I think that before the underlying markets open, the futures market definately strongly influences the opening prices of shares, thus the underlying index. However, once the underlying market is open, and the index constituents have all traded openly, then surely the situation reverses. ie the actual trading in the shares drives the index level in turn driving the futures price. I know the futures price can sometimes run away from the index/ individual share price intraday, but unless the underlying market follows, the futures price will be driven back pretty quickly.

My theory is that in the main, the opening levels of shares/ indices are based on the level of futures prices. ie futures drive indices, which drive individual share prices.

However, once all constituents are trading, the reverse is true.

Only my opinion of course.
Hi Jon

Quote: However, our gauge of market sentiment comes primarily from looking at what the index is doing. Thus, the index cart pulls the share horses .

The index is a tool that has been devised to monitor the overall strength or weakness of the market based on the performance of the shares that make up the index. If the majority of these shares show demand and perform well, this then reflects in the index.
Thus if the index is showing strength, monitoring this will give a market sentiment.

Contrary to popular belief, the index actually leads the Futures. When professional money sees strength or weakness in the Indices they will then begin to hedge their positions in the Futures market. It is this initial momentum caused by their hedging that creates a move in the futures before it is seen in the index, giving the false impression that the cash market is lead by the future.

I agree with all that has been said, but..

the FTSE 100 is a mathematical weighted average that is recalculated every (i think) ten seconds. its not an instrument that can be traded, it's just a number. so how do they get it to just touch round numbers and do things like that?

i understand how the future can do that, but not the index


Experienced member
As an aside,can anyone tell me where I can find info for the constituants of the FTSE and what their share price movements relate to in index points, eg how many FTSE points =1p move in VOD,BP,HBOS etc



Established member
2468steve... probably not of much use, but I know one of the bloomberg professional pages has it. If you really need it, let me know, and I'll try and find it for you, and email it to you or something..


Experienced member
it's not important,was just wondering if the info was avaliable somewhere. Couldn't find it anywhere on LSE or related websites.


Active member
2468steve - You can get the basic list of FTSE100 constituents from the yahoo finance website, I don't think it has their weighting on it though. Don't know if thats any use or not.


Veteren member
is that strictly true now we have etf's ?
I know its not the actual index but close enough for jazz ?

my understanding is that the index is recalulated every ten seconds by the LSE (number of vodaphone shares x price x index weighting + number of BP shares......etc, etc)

so it always amazes me how they can get the index to round numbers

obviously computer buy and sell programmes help, but it still awesome (to me) how they do it
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Well-known member
To calculate the FTSE you need to know its constituents, there shares in issue and the magic divisor figure which changes when companies come into / drop out of the index and when constituents have corporate actions / stock splits.

I thought you could get this info from but they seem to only be giving out the constituents these days not their weightings. Like wayno says, I could grab this info from my Bloomy at work if required. It must be available from another source tho ! But the divisor can be trickier to get hold of.



Veteren member
I have never found constituent weightings on the web
so I do my own and adjust once a quarter.

probably have to subscribe to ftse international to get
day to day for stocks or sectors

i meant quite often the index will touch and turn on a round number, say 4000. my charts have two decimal places and i have seen the index make a high of, say, 4000.00 and then turn round.

and its only a weighted average. somebody must have bought just enough marks and sparks shares at a certain price to make it do that. but how?

i'm just curious. nothing more than that.


Veteren member
I have managed to find this
hope its of some help, but cant get it all on the page


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Hi Sledgehammer,

i suppose the main reason for the round numbers is that most people feel comfortable with whole numbers as opposed to decimals, that is why most support/resistance levels fall into whole round numbers. just easy to work with.
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