Traders have many indicators they use to determine market direction. This may be anything from moving averages and RSI to PE and intrinsic value. Technical and fundamental analysis are used to help determine if a stock is going to move up or potentially sell off. But even if a stock has the potential to move higher, it may not if the overall market sells off. So before we go out and buy a stock, we need to verify that the overall markets are heading higher. To do this, may will use the cash indexes such and the S&P 500 or Dow 30. The problem with the cash indexes is that they are only working during the US day market or 6 ½ hours of a 24 hour day (27% of the time). So we must find something that will track the markets (our stocks) through Asia, Europe, and the US. This is where the 7 Sisters step in.
The 7 Sisters is comprised of ES (Emini S&P futures), YM (Emini Dow futures), NQ (Emini NASDAQ 100 Futures), DAX (DAX Futures), ZB (30 yr. Treasury Bond Futures), GC (Gold Futures), and CL (Crude Oil Futures). These futures trade almost 24 hours a day. The Index futures are derivatives of the cash indexes. If stocks move, the indexes move, and the futures move as well. But since the cash indexes have been turned off during the Asian and European markets, we can look at the index futures to tell what stocks are doing around the world. The DAX is an index future that follows the top 30 companies in Germany (Europe’s largest economy). The bond futures will follow interest rates. Gold futures follow fear and currency valuation, and crude oil tells us what we will be paying for energy and transportation.
Knowing the direction of these markets (indicators) will give use a broad sense of direction in the overall market. We don’t have to fill our charts with all the technical indicators, nor pour through tons of fundamental data. We can simply record the year, month, week, and day opens in 7 sisters and find where the current market is, then compare to the opens. If all are higher, then it is safe to go buy stock. If all are lower, we may need to wait before buying stock. Good luck trading.