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Look into the Future with Stock Market Indexes

Futures Contracts on Stock Indexes May Hint at Market Direction

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Look into the Future with Stock Market Indexes
You can get a clue about where after-hours traders are thinking the market will open by looking at the indexes in relationship to “fair value.”

Fair value is the relationship of a market index to its futures contract.

If the futures are higher than the fair value, then traders are betting the market will open up. However, if the futures are lower than the fair value, traders are looking for the index to open lower.

This is not a precise measure and it will change during the night. The closer it is to market opening, the more reliable this gauge becomes.

You will hear the electronic media reporting this relationship before the market opens or you can go to any number of sources and get the information yourself.

The accompanying chart comes from CNNMoney.com.

It shows that at this point in time, traders are expecting the S&P 500 to open slightly higher and the Nasdaq to open lower.

Articles in This Series

Introduction to Stocks

Understanding Stock Share Terms

Understanding Stock Diversification

Understanding Cyclical and Non-Cyclical Stocks

Stock Sectors - How to Classify Stocks

Making Money with Dividends

Understanding Stock Splits

What Market Indexes Tell Us

Major Stock Exchanges

Look into the Future with Stock Market Indexes

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