Tuesday, April 22, 2014

Smart Money Flow Index

Don't make sense not to live for fun
Your brain gets smart but your head gets dumb
--Smash Mouth

My friend Todd Harrison examines the Smart Money Flow Index (SMFI). The SMFI is calculated by taking the 10 am Dow Jones Industrial Average (DJIA) value - previous day close DJIA + next day closing DJIA.

Because the first 30 minutes of market action are viewed as associated with emotional, unsophisticated 'dumb money' and end-of-day action is often seen as driven by 'smart money,' significant divergences between the DJIA and the SMFI suggest that dumb money has taken control of the tape temporarily and is due for a comeuppance.

Current SMFI readings suggest comeuppance pending...

position in SPX

1 comment:

dgeorge12358 said...

The market has been distorted by far bigger forces than flash trading. To me, the force that has rigged the market... is the Federal Reserve, not the flash traders.
~Stephen Roach