The Infallible Indicator for futures


Well-known member

It sounds a big claim: an infallible or “never wrong” indicator . But I can assure you all that it exists and seems to work for any index I have tried (Dax, S&P,Nasdaq, FTSE, Ibex). Basically the idea is simple. The futures drive the cash index so if you study the relationship between futures and cash you can tell which way the futures are moving.
If the futures are higher than cash, then the move is up and if lower then the move is down. It seems trite, dead simple and rather obvious. Only the reality of life is that there is continuous arbitrage between cash and futures so if futures (say) rise too much above cash, people sell the futures and buy cash and vice versa. . So if practice futures oscillates ahead of cash and then below it. The chart below showing the 5 minute S&P futures in black versus cash for Monday 17th March 2002 is a case in point.

Now a fluctuating line above and below the cash index is of little use but if we measure on a moving average basis the difference between the cash and futures currently are from the moving average of cash and futures we can establish a trend.

The formula is absurdly simple:
For the S&P futures:
CL+CL(SPX.X)-MA(CL+CL(SPX.X))>0 for futures up and <0 for futures down.
Where: CL is the closing price of the last bar of the futures
SPX.X is the S&P 500 cash index
And MA is a 3 bar simple moving average (5 works but is less sensitive)

For FTSE replace SPX.X with FTSE index, etc

When the formula is >0 it’s a buy and when <0 it’s a sell.

It works in any timeframe .. and for any index (although it has to be written for each index.)

I have set it up in my charts as a colour marker which is green for up and red for down and it is shown in the following chart as the colour marker called “SPOOSDIFFc” in the lower section of the chart.

Now on its own it can give false entries as it is based on a moving average and hence this can change in value before a bar completes in time so I would not use it on its own to buy or sell. But as a confirming indicator it is faultless. It prevents so many trades where the indicators or patterns suggest one thing..but…

(This indicator is based upon ideas from but I have taken them an modified them.)


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Hi Madfish,

I think I remember you're talking about 'fair value' here. A very common future trading tool...?

Program traders use it all the time. I hate program traders :~/
Definitely nothing an average floor trader wouldn't know, anyway.

I like your posts, but this is a bit of a claim here "infallible". Doesn't exist. If there was an "infallible" indicator out there, I believe it would take approximately 24 hours till every trader in the world knows about it. The only indicator is superior knowledge and experience.
I define it with my CSS theory (cerebral superiority spread) as well as other forms of 'slippage'.
CSS to me means the edge you have over -A- nother (of millions) trader in your stock/comm/derivative, to make a slightly larger profit than him. Over time, these tiny 'extra' profits will accumulate to wealth, while at the same time they will slowly bleed the trader on the 'other end' of the world to death. This difference I therefore call the 'cerebral superiority SPREAD', because the differences are tiny, almost like little spreads, generated by better decisions made through superior knowledge/experience/reaction.
This is CEREBRAL (brain-based) (!!!) There is no software that can in any way help you with this. Dump neural networks :D

Of course, there are other factors involved, such as the fact that some people are not short-term traders and therefore make a purchase and don't care about the current price and buy/sell a whole lot, which can be to your advantage/disadvantage, besides there are lots of beginners, gamblers, mistakes and other market influences. So you don't really need to be atop 99.99% of traders, but certainly atop 95% of them.
Don't forget that 95% of the ppl posting in these boards are losers, either way, so who's getting all their money? Right! 2% of us! Let's get it on! =)

Here we go. Future for Scientopia!
~The Scientist.
Heya Madfish - btw gotta say it here - I think you made some great contribs on these boards - We need more ppl like you - 5 stars!
No folks I'll beat ya at maths any day - But those other 3% definitely go for brokers, specialists, market makers... Ooops... Are we already at 10%?
Aaaah Well....