Taking a look at the charts I see gaps that need to get filled at 1590 in the Nasdaq and 925 in the XLF. I think we'll hit those levels sometime this week which suggests a little bit more downside in ultimately in store and if futures are any indication we may actually see that happen today. Again, markets opening up weak is "wall of worry" type behavior. They say that dumb money (emotional money) operates in the first half hr of the day and the smart money the last hour of the day. As you can see by this chart, the gap between smart money and dumb money is very large and it shows that since the October low smart money has been getting more and more bullish while dumb money more and more bearish.
Near the peak of the tech bubble in 2000 it was the opposite condition....smart money had be trending strongly bearish while dumb money strongly bullish and again there was a huge gap between the two. It should be noted that this indicator is a long term indicator used to predict changes in long term trends and it can be early....about 6 months or so. Thus, given that the huge divergence between smart money and dumb money began in early October just over 6 months ago it could indicate a change in long term trend from down to up is immanent....or has already begun.... stay tuned.
This is a very interesting chart. Do you know how the smart buyers and emotional buyers data is obtained?
ReplyDeleteFor each type of buyer, it is calculated by adding (subtracting) the number of points the Dow makes (loses) during the time frame in question.
ReplyDeleteFor example if the Dow lost 100 points from opening bell to 10 am, the emotional money indicator will will drop by 100 points. If it gains 100 points from 3pm to close the smart money indictor rises by 100 points.
If they are both trending the same way, it's best to follow the message of what the smart money is saying.