Can the Basis Be Used as a Predictive Indicator for Future Spot Price Movements?

While the basis reflects current market sentiment, using it as a direct predictive indicator for future spot prices is unreliable. A large positive basis (strong contango) shows bullishness but can also signal an over-leveraged and euphoric market, which often precedes a price correction.

Similarly, a negative basis (backwardation) shows bearishness but can also present a bottom signal if sentiment is overly pessimistic. Therefore, the basis is more of a coincident indicator of current market conditions and leverage levels rather than a reliable crystal ball for future price direction.