Wednesday, April 20, 2011

Big Money Index Added To My Blog

Some of my friends may know about the Big Money Index, an index I composed to gauge the money flow into or out of the equity market. Supposedly the money flow drives the price. So the market, usually represented by the S & P 500 index, will move higher if money flow is positive, and lower if money flow is negative. Most of the time S & P 500 moves along with BMI. Occasionally we may see a divergence, meaning that the money flow is not reflected by the market, yet. Since eventually we expect S & P 500 to follow BMI, such divergence offers good trading opportunities.

I've added BMI to my blog to the lower right corner. Although the chart will be automatically updated every five minutes, you don't have to fix your eyes on it. For one this is mainly for updating S & P 500. For two usually we are looking for a divergence spanning a couple of days.

As of today we see a positive divergence between BMI and S & P 500. So I expect S & P 500 to make new high soon, if BMI still works.