Smart Money Index

What is the Smart Money Index?

The Smart Money Index (SMI) is a cumulative sentiment line for stock indexes, usually credited to money manager Don Hays. It rests on a premise about intraday time-of-day effects: the first half hour of the cash session is dominated by emotional, news-driven trading, while the final hour is where more deliberate, well-capitalized participants position. Each day the running total subtracts the index's net change over the first 30 minutes and adds the net change over the last hour.

A market that habitually sells off early and firms late therefore builds a rising SMI even if closing prices go nowhere. The absolute level means little; practitioners track its direction and its divergences from the underlying index. New index highs the SMI refuses to confirm are read as distribution into strength, and SMI resilience under a falling tape as accumulation. Like OBV and other cumulative lines it is slow and contextual, and it depends on a defined session open and close, which is why it is applied to cash-session index data rather than 24-hour markets.

How traders use it

• As a divergence study: multi-week disagreement between the SMI and its index is the classic read, flagging distribution beneath a strong tape or accumulation beneath a weak one. Divergences can persist for months before mattering, so they are context, not triggers.
• As trend confirmation: an index advance accompanied by a same-direction SMI is treated as better supported than one where late-session flows consistently lean the other way.
• As one input among internals: the premise that informed money trades late is an assumption rather than a law, so most users weigh the SMI alongside breadth and volume measures instead of acting on it alone.