Continuous Contract + Roll Over Adjustments ES ESM2024
TRANSCRIPT:
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“All right, happy Sunday afternoon. Let’s talk about the continuous ES contract versus the M contract. So this is the continuous right now, and you can see estimated volume 2.6, and the June contract received 1.2—a significant jump up from the prior day. So it’s time to start rolling over and trading the M contract. Let’s look at the M contract versus the Continuous contract a little closer.
So here’s the continuous contract, and TradingView went ahead and switched over, and you’ve got that gap. That happens every time there’s a switch over. Now, an ES trader that I respect always uses the back adjust button. So let’s push the back adjust button, and what that does is it pulls the price up to meet it and just readjust everything.
Now let’s compare this ES continuous contract with the back adjustment turned on compared to the M contract. This is a lot like when you go to the optometrist, and they’re like A or B, A or B. So let’s compare them with the back adjust turned on. I’m going to switch over to the M contract now, and just look at this all the way from here to here. Look at it.
I’m going to switch back: continuous, M contract, continuous, M contract, continuous, M contract, very, very, very, very, very similar. So let’s dive a little deeper. What I did first of all is turn on volume, and you can see where the volume has come in—right a little bit here, a little bit here, a little bit here, tiny, tiny, tiny, right? And then it all came in.
And why is that important? Because when people are defending price, how many people are defending price? Obviously, there’s going to be more people defending price on this day than people defending price on this day because everyone is rolling over to the M contract. No one’s going to have the H contract here—you know, three weeks. No one’s defending an H contract price because that’s not where they are in the trade.
So let’s look at the low here, and that low is at 2425. Let’s go look at that on the continuous contract. It’s at 26—not the same, but pretty close. What about this low here on the continuous contract? We’re at 22. On the M contract, we are at 18—close, but not the same. Close, but not the same.
So let’s do this. Now, let’s go to a daily chart. Let’s find something a little further back, and you can see where this thing has spot-kind of traded here and there. And then you can see where the volume kind of came in—there’s still gaps in here. It’s not the cleanest, for sure. Look where the volume came in, obviously, compared to the rest of the time.
So let’s come in here, and let’s pick a significant, what I would call, a significant level on the chart. So let’s do this front side here, and let’s do the bottom of the blue candle here on the M contract. Let’s find the same thing over here. Let’s go to the daily. Let’s move these two things down to here. Let me turn on the magnet tool, make sure that this thing is snapping where it needs to snap, and come in here. Same thing over here—yep, okay.
So over here, we have 21 and 5275. 21 and 5275. Yeah, that doesn’t look close, does it? So let’s switch back. 21 for this first number and 29. All right, so the variance is increasing. This one’s 63.2—that’s 10 points off. So as we get further away from price, the discrepancy increases.
Now the truth is, how far away is that? Let’s look. That’s 260 points away. This is 330 points away. Am I likely going to play the bounce? 200 and—I mean, 300 points away, probably not. We trade our intraday levels as they’re developed. So the truth is, as we’re coming down, I’m hoping to be short coming towards them. I’m not necessarily using them as a bounce level per se as a trade entry.
So what am I going to do? I tell you what, I’m going to do. I am going to do the continuous contract still, and I am going to turn on the back adjust button and see how I like it. I’ve actually never done it; it’ll be a new experience. But I have gone in and made previous contract notes, and I can promise you right now, if I turned on all my folders and we scroll down a little bit, you would see other contract levels that we actually never went and hit, but I noted them for thoroughness.
Stay green, my friends. And to learn more about our group, go to microstrader.com.”
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