Why All the Interest in the S&P Futures Pre-Market Activity?

I remember when I began learning how to trade I was told I needed to keep an eye on the S&P futures – specifically the pre-market activity. There are many free tools on the Internet that give us an indication of what the S&P futures are trading at before the market opens for trading.

As a matter of fact when I go to the gym it is a rare sight for anyone on a treadmill or stationary bicycle to not be tuned in to one of the stock market business television stations where the S&P futures data is prominently displayed and continuously updated.

What Does the S&P Futures Pre-Market Data Mean?

As you know the US stock market closes for trading at 4PM EST then of course, there is a brief settlement period, and the S&P futures resumes trading on the Globex (or the Global Exchange). The S&P futures can now be traded all through the night covering the Asian session and the European session while we are fast asleep here in the US.

In the event this overnight trading event creates selling in the S&P futures then when it gets ready to resume trading in the US we can see the S&P futures pre-market data reflecting that the S&P futures will open negatively for trading.

If the overnight trading session creates buying in the S&P Futures then we will see that the S&P futures pre-market data will reflect a positive open. All it is doing is letting us know what has transpired overnight.

Getting back to the scenario I began with where I was told that to really get a handle on how to trade I needed to keep an eye on the S&P futures pre-market data the instructor was implying that whatever happened overnight may give us a very clear direction for the US trading session.

As a matter of fact he is not the only person that has jumped on that bandwagon. It was, for a long time (and from the looks of the individuals in my gym) still is an important indicator.  This is where I have to step back and say that unless you are trading S&P futures or unless the opening of the market is key to your making a trading decision the information does not really mean anything.

The reason is that it is only an indication of how the market was traded overnight – nothing more. I have seen time and time again how the S&P futures pre-market data was really negative and the market (while initially negative reflecting that overnight activity) now went positive!  Sometimes it does so in a very big way.

I have also seen the opposite where I have seen the S&P futures pre-market data indicating quite the bullish environment and at the end of the day the market turned very bearish.

So when it comes time to trying to capture an “edge” in your trading I must say watching the S&P futures pre-market data would not be one of them.