Todd Harrison: The Smart Money Flashes Caution

By Todd Harrison  APR 02, 2014 11:28 AM

A flashing red signal coincides with all-time highs.

 


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 I think it's time we stop, children, what's that sound; everybody look what's going down. . .
-- Buffalo Springfield

The following description of the Smart Money Flow Index is from Bloomberg (paraphrased):

The Smart Money Flow Index (SMFI) is calculated by taking the price of the Dow Jones Industrial Average (INDEXDJX:.DJI) at 10:00 a.m. on any given day, subtracting it from the previous day's close, and adding it to the next day's closing price. The first 30 minutes represent "emotional buying," driven by greed and fear of the crowd; smart money typically waits until the end of the day.  If/when the DJIA makes a new high that is not confirmed by the SMFI, there is usually trouble ahead. Check out the chart.
 

Chart source: Bloomberg

Random Thoughts:

R.P.

Twitter: @todd_harrison

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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