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Take SPX, SPY, and /ES (E-mini S&P). My understanding is that these all move together as they are all based off the S&P (correct me if I'm wrong there). However, various levels such as the low of 8/24/15 are different distances from other areas of the charts such as the 9/28/15 low. SPX is a 12 handle difference while SPY is about the equivalent of a 50 handle difference. How does one apply any technical readings when two or more charts that move in concert are so different?

  • This question seems unclear and / or too broad. It might help if you edit it to ask something more specific. – user32479 Sep 29 '15 at 13:59
  • I'm not certain how to phrase it with more specificity except to give that example between spx and spy where clearly if spx were to reach the low of 8/24 spy wouldn't even be close and vice versa. Maybe both the spy low of 9/28 and spx low of 9/28 become technical areas where both could see greater action. If you have any suggestions how I could edit it, I'd be happy to try to. – Joey Sep 29 '15 at 14:05
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    I personally find your use of the term "technicals" here to be confusing, but maybe someone else will read it differently. I'm genuinely confused about what you're asking to the point where I cannot make an edit. Are you just asking why SPY and SPX don't track each other perfectly? (That's a legitimate question, but is it yours?) Or are you asking some thing general about technical analysis for which you think this is a good example? (I cannot personally figure out what the general question would be that's illustrated by this example.) – user32479 Sep 29 '15 at 14:21
  • Thanks, I'll post a question separately asking why spy and spx don't track perfectly. I'll try my best to illustrate my technical analysis question. SPX has a low of 1867 on 8/24/15 so if I were to view this as support, then does this mean I might expect the corresponding value in SPY (about 186.40) to be a support level since they track together roughly 1 point of SPX for 0.1 points in SPY? The low in SPY from that date is 182.4, a whole 4 points (or about 40 spx points) lower. Does this help illustrate what I'm trying to figure out? – Joey Sep 29 '15 at 15:14
  • I'll look for your new question on SPY and SPX and answer it if I can. I have a feeling that once you get that answer, you may take a different view on whatever it is you wanted out of this question. – user32479 Sep 29 '15 at 16:01
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Following comments to your question here, you posted a separate question about why SPY, SPX, and the options contract don't move perfectly together. That's here Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other?

I provided an answer to that question and will build on it to answer what I think you're asking on this question. Specifically, I explained what it means that these are "all based on the S&P." Each is a different entity, and different market forces keep them aligned. I think talking about "technicals" on options contracts is going to be too confusing since they are really a very different beast based on forward pricing models, so, for this question, I'll focus on only SPY and SPX.

As in my other answer, it's only through specific market forces (the creation / redemption mechanism that I described in my other answer), that they track at all. There's nothing automatic about this and it has nothing to do with some issuer of SPY actually holding stock in the companies that comprise the SPX index. (That's not to say that the company does or doesn't hold, just that this doesn't drive the prices.) What ever technical signals you're tracking, will reflect all of the market forces at play. For SPX (the index), that means some aggregate behavior of the component companies, computed in a "mathematically pure" way. For SPY (the ETF), that means (a) the behavior of SPX and (b) the behavior of the ETF as it trades on the market, and (c) the action of the authorized participants. These are simply different things.

Which one is "right"? That depends on what you want to do. In theory you might be able to do some analysis of technical signals on SPY and SPX and, for example, use that to make money on the way that they fail to track each other. If you figure out how to do that, though, don't post it here. Send it to me directly. :)

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