(Bloomberg) -- U.S. stocks have been dropping toward the end of their regular session in the past couple of weeks.
“Yesterday, a late day S&P sell-off continued a trend over the last two weeks of weakness in the last hour of the day,” Susquehanna Financial Group LLP's Chris Murphy wrote in a note Wednesday. The gauge was negative over the 3 p.m. to 4 p.m. time period in New York in eight of the 11 days through Tuesday, with a daily average performance of minus 0.34%, he said, compared with a 0.07% average gain from 9:30 a.m. to 3 p.m.
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The Smart Money Flow Index, which measures the Dow Jones Industrial Average 30 minutes into a session versus the end of the day, has been decreasing in the past few weeks, Murphy said. A trading maxim is that the action early in a session features “dumb money,” which reacts emotionally to news, while “smart money” like institutions wait until the end of the day.
With the growth of passive investments and other changes in dynamics that may be less true, but the decline in the SMF Index could be a sign “smart money” is selling.
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