The Smart Money Index is a volume-based indicator that differentiates between institutional buying (PVI on up volume) and retail selling (NVI on down volume). It helps identify when institutional money is accumulating versus when panic selling dominates.
Key Use: Identify institutional flow direction and divergences from retail sentiment.
SMI = PVI (Smart Money) vs NVI (Retail)
SMI Ratio = PVI / NVI
Divergence = When SMI and Price move in opposite directions
Institutional vs Retail Identification
PVI strength = smart money buying; NVI strength = retail panic.
Major Top/Bottom Divergences
Price at new high but PVI declining = institutional distribution warning.
Capitulation Identification
NVI spikes on panic selling often signal bottoms.
✓ Advantages
⚠ Limitations