Which of the following statements about contrary-opinion and smart money technicians is CORRECT?
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A. B. C. D.C
When investor credit balances are falling, investors are bullish, so contrary-opinion technicians are bearish.
The other statements are incorrect. Although a specialist short sale ratio less than 30% indicates a bull market, this indicator is followed by smart money technicians. When the yield-differential between high quality and lower-quality bonds widens, the confidence index decreases, and smart-money technicians would be bearish. A widening yield spread is a bearish sign to smart-money technicians because it means that the confidence index has decreased. When 75% or more of futures traders are bullish on stock index futures,contrary-opinion technicians become bearish and sell.
Summary of the indicators for contrary-opinion and smart money technicians:
Contrary-opinion technicians (trade the opposite of the mass of general investors):
Smart-money technicians (follow the professional investors):