In reference to yesterday's entry for the probability of correction on the U.S. stock market, today, I decided to publish a very interesting Index.
Smart Money Flow Index
Index description:
The Smart Money Flow Index is calculated by taking the action of the Dow in two time periods: the first 30 minutes and the close. The first 30 minutes represent emotional buying, driven by greed and fear of the crowd based on good and bad news. There is also a lot of buying on market orders and short covering at the opening. Smart money waits until the end and they very often test the market before by shorting heavily just to see how the market reacts. Then they move in the big way. These heavy hitters also have the best possible information available to them and they do have the edge on all the other market participants. To replicate this index, just start at any given day, subtract the price of the Dow at 10 AM from the previous day's close and add today's closing price. Whenever the Dow makes a high which is not confirmed by the SMFI there is trouble ahead.
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| chart 1. Smart Money Flow Index, 2014-03-26 |
It is easy to notice the growing spread between both Indexes. What can mean outflow Smart Money Flow from the stock market. Given the recent behavior of the SP500 Index over time, it can be concluded that this is another argument for a correction in the United States. In addition, I put the update in comparison to yesterday's chart the SP500 Index.
Today, during the European session Index once again tested the upper levels of the lateral channel. At the moment, the market showed weakness and during the U.S. session, we are witnessing the testing of the lower levels of the channel.
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| chart 2. fSP500 Index Daily, 2014-03-26 |
regards,
oscarjp
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects oscarjp-chrimatistikos current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.
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