Which of the following represents a "smart money" technical indicator? Choose the best answer.
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A. B. C. D. E. F.C
Of the choices listed, only the "T-Bill-Eurodollar Yield Spread" represents a "smart money" technical indicator. The T-Bill-Eurodollar Yield Spread is used by technical analysts to measure investor sentiment (i.e. confidence) on a global scale. Specifically, during times of international crisis, there is usually a "flight to quality" personified by a bidding up on U.S. Treasury issues. This will cause a widening of the spread between U.S. T-Bills and Eurodollars, causing a decline in this ratio. Technical analysts would view a sharp increase in the spread between T-Bills and Eurodollars as indicative of an upcoming market trough, and historical evidence has tended to support this belief.
"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. The "Block
Uptick/Downtick Ratio" is used to measure the near-term sentiment of institutions.