Investing

Markowski: Premature Vaccine Rally To Soon Fizzle!

Markkowski Post Crash Peak DUk8ql

Excerpt and chart below from “The Smart Money Is Leaving Town” by CFA Mike Lebowitz, published by RIA Pro on 11/12/20.  

“Bloomberg’s Smart Money Flow Index is a measure of how ‘smart money’ is positioning itself in the S&P 500. The logic behind the index is that smart investors tend to trade near the end of the day, while more emotional-based traders dominate activity in the first 30 minutes of the trading day. The index is calculated as follows: yesterday index level – the opening gain or loss + change in the last hour.  As shown below, the Smart Index and the S&P were well correlated until late August. Since then, as highlighted by the red arrow, they have diverged sharply. Over the last ten years, the S&P 500 and the Smart Index have a strong correlation of .65. As such, we expect they will converge in time. The light blue circle shows they also diverged, albeit to a much lesser extent, in January and February as the smart money correctly sensed problems.”

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