Thanks for your expert opinion on my intererpretation of Hertler's article.
"But I'd like to see a conceptual explanation of why every every 9 bar on a 5 minute chart in between the Hertler time periods (first half hour, last hour) can represent dumbmoney/smartmoney flow."
The 9 bars on a 5 minute chart are mere suggestions that I made as I'm using the wave59script on a 5 minute chart and working on a 9 period.
Secondly the concept of smart money(positive flow) and dumb money(negative flow) stems from the standard Money Flow Index theory, where, as you well know, the following definitions hold:
# Positive Money Flow: The Money Flow on days where the Typical Price is greater than the previous day's Typical Price.
# Negative Money Flow: The Money Flow on days where the Typical Price is less than the previous day's Typical Price.
In the smart money and dumb money flow in wave59 script, we are not working with the volume parameter, but solely on prices, unlike the Standard Money Flow Index.
Since we are using the day's intraday prices, I'm extrapolating the idea that the first half hour typical price is taken to be the previous day's typical price, and each successive closing price ( as a variation to computing the typical price - the( H+L+C/3 ) bars within the 9 periods, using that as an arbitary example ), is taken to be the typical price. ( Of course, it is possible to work out the typical price of the 9 bars if we wish, and in fact may be more accurate? ). Again, I'm relying on Hertler's article that stated... "...dumb money" (as a negative contribution) and the "smart money" (as a positive contribution), with the two classes identified by the time of day that their trades are recorded...which to me, seemed to suggest that we can record positive and negative contributions by the time of day...or intraday, and in which, wave59 Smart Money Index does chart the smart money flow and dumb money flow as I have shown in various intraday charts of the XJO previously.
We have some authors who do term the standard Money Flow Index as Smart Money Index, of which, an example together with spreadsheet view is shown below.
Considering the discussion is fast moving out of my depth, and the fact that my interpretation is a galaxy away from Hertler's and yours, perhaps some one more well verse in smart and dumb money flows can chip in. Also please consider my interpretation as initial suggestions for some technical research that does not hold water, if there is no acceptable basis in your technical opinion.
I've high respect for your Redback's weekly report on the various indexes, and have always enjoyed all the excellent charts and overview. Thanks.
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