This is in response to Joy Mitali's request for an explanation of the phenomenon of "cash futures divergence" or CFD - which I had touched upon briefly in another discussion.
What is cash futures divergence: Simply described, it is when a stock/commodity/metal or currency which trades both in Cash and Futures market shows a divergence at some point in time.
What happens is that one of the market goes up and the other is either stable or falling - or the cash makes a new high and the futures either does not follow or goes in an opposite direction - this is termed as CFD
This phenomenon gives us interesting clues to the possible future direction of the market and it is worth watching for some of these important hints that the market throws at us from time to time.
I am posting two charts of platinum cash and futures to demonstrate the point
What is cash futures divergence: Simply described, it is when a stock/commodity/metal or currency which trades both in Cash and Futures market shows a divergence at some point in time.
What happens is that one of the market goes up and the other is either stable or falling - or the cash makes a new high and the futures either does not follow or goes in an opposite direction - this is termed as CFD
This phenomenon gives us interesting clues to the possible future direction of the market and it is worth watching for some of these important hints that the market throws at us from time to time.
I am posting two charts of platinum cash and futures to demonstrate the point