Nice manipulated finish to the market today.

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kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Everything this represents

Everything this represents is pretty much understood.

This is theft.

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2489
Smart Money Index

Johnny Oxygen wrote:

Anyone else see the Dow today?

Yep down 200 all day then zoom up 360 to 168.

riiigghhhtt

I've been taking screen shot does anyone know how to post jpegs?

JO,

There is an age-old saying in the stock market: "The dumb money trades in the first hour of the day and the smart money trades in the last hour" (paraphrased).  There is even a common market indicator that is used to track the difference between the first hour of trading and the last hour of trading, and it's called the Smart Money Index (SMI). Here is some info from Wikipedia on how it works:

Smart Money Index

The main idea is that the majority of traders (emotional, news-driven) overreact at the beginning of the trading day because of the overnight news and economic data. There is also a lot of buying on market orders and short covering at the opening. Smart, experienced investors start trading closer to the end of the day having the opportunity to evaluate market performance. Therefore, the basic strategy is to bet against the morning price trend and bet with the evening price trend. The SMI may be calculated for many markets and market indices...

Basic formula

The today's SMI reading = yesterday's SMI – opening gain or loss + last hour change

For example, the SMI closed yesterday at 10000. During the first 30 minutes of today's trading, the DJIA has gained a total of 100 points. During the final hour, the DJIA has lost 80 points. So, today's SMI is 10000 – 100 – 80 = 9820.


Interpretation

The SMI sends no clear signal whether the market is bullish or bearish. There are also no fixed absolute or relative readings signaling about the trend. Traders need to look at the SMI dynamics relative to that of the market. If, for example, SMI rises sharply when the market falls, this fact would mean that smart money is buying, and the market is to revert to an uptrend soon. The opposite situation is also true. A rapidly falling SMI during a bullish market means that smart money is selling and that market is to revert to a downtrend soon. The SMI is, therefore, a trend-based indicator.

Back in May-June, there was a two week period in which the SMI was negative for 10 days in a row (i.e. last hour was of trading was negative). That was the longest streak of last hour selling that we have seen in 10 years.

Now, we are seeing the opposite, meaning that the smart money is buying in the last hour. 

What is my point?

Yes, there is manipulation in the market, but it is not the kind that you are thinking (TPTB propping up index prices). The smart money is profiting from the dumb money, as it has since day one in the market place. Your desire to see the market drop causes you to overlook the other side of the coin. 

Best....Jeff

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1441
Re: Smart Money Index

Interesting.

Thanks Jag.

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1441
This is what gets me.

Its moves like this that make me think something is up. This is from September 26. Up +125 in the blink of an eye.

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