Which of the following represents a "smart money" technical indicator?
Click on the arrows to vote for the correct answer
A. B. C. D. E. F.F
Of the choices listed, only "debit balances in brokerage accounts" is a smart money technical indicator. Technical analysts view investors who leverage their portfolios through margin loans as being sophisticated. So said, technical analysts see an increase in debit balances, i.e. an increase in margin borrowing, as a bullish signal. Conversely, technical analysts would view a decline in margin borrowingas a bearish sign. While this viewpoint is somewhat counter intuitive, the degree to which technical analysts use aggregate margin debit balances to track the "smart money" is high.
"Breadth of market" refers to the measure of advancing versus declining issues. The Diffusion Index is a measure of market breadth and is defined as the volume of advancing issues plus one-half of the volume of unchanged issues, divided by the total number of issues traded. Short interest measures the total volume of outstanding short positions, and the sentiment of futures traders is used by contrarian technical analysts, who take a contra approach.