EMPHASIS ON THE FUTURES MARKETS
Inter market awareness parallels the development of the futures industry. The main
reason that we are now aware of inter market relationships is that price data is now
readily available through the various futures markets that wasn't available just 15 years
ago. The price discovery mechanism of the futures markets has provided the catalyst
that has sparked the growing interest in and awareness of the interrelationships among
the various financial sectors.
In the 1970s the New York commodity exchanges expanded their list of
traditional commodity contracts to include inflation-sensitive markets such as
gold and energy futures. In 1972 the Chicago Mercantile Exchange pioneered the
development of the first financial futures contracts on foreign currencies. Starting in
1976 the Chicago exchanges introduced a new breed of financial futures contracts
covering Treasury bonds and Treasury bills. Later on, other interest rate futures, such
as Eurodollars and Treasury notes, were added. In 1982 stock index futures were
introduced. In the mid-1980s in New York, the Commodity Research Bureau Futures
Price Index and the U.S. Dollar Index were listed.
Prior to 1972 stock traders followed only stocks, bond traders only bonds,
currency traders only currencies, and commodity traders only commodities. After
1986, however, traders could pick up a chart book to include graphs on virtually
every market and sector. They could see right before their eyes the daily movements
in the various futures markets, including agricultural commodities, copper, gold, oil,
the CRB Index, the U.S. dollar, foreign currencies, bond, and stock index futures.
Traders in brokerage firms and banks could now follow on their video screens the
minute-by-minute quotes and chart action in the four major sectors: commodities,
currencies, bonds, and stock index futures. It didn't take long for them to notice that
these four sectors, which used to be looked at separately, actually fed off one another.
A whole new way to look at the markets began to evolve.
On an international level, stock index futures were introduced on various
overseas equities, in particular the British and Japanese stock markets. As various
financial futures contracts began to proliferate around the globe, the world suddenly
seemed to grow smaller. In no small way, then, our ability to monitor such a broad
range of markets and our increased awareness of how they interact derive from the
development of the various futures markets over the past 15 years.
It should come as no surprise, then, that the main emphasis in this book will be
on the futures markets. Since the futures markets cover every financial sector, they
provide a useful framework for our inter market work. Of course, when we talk about
stock index futures and bond futures, we're also talking about the stock market and
the Treasury bond market as well. We're simply using the futures markets as proxies
for all of the sectors under study.
Inter market awareness parallels the development of the futures industry. The main
reason that we are now aware of inter market relationships is that price data is now
readily available through the various futures markets that wasn't available just 15 years
ago. The price discovery mechanism of the futures markets has provided the catalyst
that has sparked the growing interest in and awareness of the interrelationships among
the various financial sectors.
In the 1970s the New York commodity exchanges expanded their list of
traditional commodity contracts to include inflation-sensitive markets such as
gold and energy futures. In 1972 the Chicago Mercantile Exchange pioneered the
development of the first financial futures contracts on foreign currencies. Starting in
1976 the Chicago exchanges introduced a new breed of financial futures contracts
covering Treasury bonds and Treasury bills. Later on, other interest rate futures, such
as Eurodollars and Treasury notes, were added. In 1982 stock index futures were
introduced. In the mid-1980s in New York, the Commodity Research Bureau Futures
Price Index and the U.S. Dollar Index were listed.
Prior to 1972 stock traders followed only stocks, bond traders only bonds,
currency traders only currencies, and commodity traders only commodities. After
1986, however, traders could pick up a chart book to include graphs on virtually
every market and sector. They could see right before their eyes the daily movements
in the various futures markets, including agricultural commodities, copper, gold, oil,
the CRB Index, the U.S. dollar, foreign currencies, bond, and stock index futures.
Traders in brokerage firms and banks could now follow on their video screens the
minute-by-minute quotes and chart action in the four major sectors: commodities,
currencies, bonds, and stock index futures. It didn't take long for them to notice that
these four sectors, which used to be looked at separately, actually fed off one another.
A whole new way to look at the markets began to evolve.
On an international level, stock index futures were introduced on various
overseas equities, in particular the British and Japanese stock markets. As various
financial futures contracts began to proliferate around the globe, the world suddenly
seemed to grow smaller. In no small way, then, our ability to monitor such a broad
range of markets and our increased awareness of how they interact derive from the
development of the various futures markets over the past 15 years.
It should come as no surprise, then, that the main emphasis in this book will be
on the futures markets. Since the futures markets cover every financial sector, they
provide a useful framework for our inter market work. Of course, when we talk about
stock index futures and bond futures, we're also talking about the stock market and
the Treasury bond market as well. We're simply using the futures markets as proxies
for all of the sectors under study.
Euro Exchange Rate
