16.Which one of the following would be a bullish signal to a technical analyst who is "following the smart money"?

A)   The yield differential between high-quality and low-quality bonds increases.

B)   The debit balance in brokerage accounts decreases.

C)   The ratio of short sales by specialists to total short sales becomes abnormally low.

D)   The market shows good relative strength when compared to individual stocks.

17.When technical analysts say a stock has good "relative strength," they mean the:

A)   recent trading volume in the stock has exceeded the normal trading volume.

B)   total return on the stock has exceeded the total return on other stocks in the same industry.

C)   stock has performed well compared to other stocks in the same risk category as measured by beta.

D)   ratio of the price of the stock to a market index has trended upward.

18.Which one of the following would be a bearish signal to a smart-money technical analyst?

A)   The T-bill Eurodollar spread widens.

B)   The ratio of short sales by specialists to total short sales becomes abnormally low.

C)   The differential between high-quality and low-quality bonds decreases.

D)   The debit balances in brokerage accounts increase.

19.A time series calculated as the ratio of the average yield of 10 top-grade corporate bonds to the average yield on Dow Jones 40 bond is known as:

A)   Lehman Brothers "GAP" Index.

B)   Salomon's High yield index.

C)   breadth index.

D)   confidence index.

20.Which of the following would signal a technical analyst to expect a sharp increase in demand for a stock?

A)   The spread between the yield on high-quality and low-quality bonds widens.

B)   Movement into the analyst's resistance level range.

C)   Price movement into the analyst's support level range.

D)   When the specialists short sale ratio is above 50 percent.

答案和详解如下：

16.Which one of the following would be a bullish signal to a technical analyst who is "following the smart money"?

A)   The yield differential between high-quality and low-quality bonds increases.

B)   The debit balance in brokerage accounts decreases.

C)   The ratio of short sales by specialists to total short sales becomes abnormally low.

D)   The market shows good relative strength when compared to individual stocks.

The correct answer was C)    

When the Short Sales by Specialists Ratio (short sales by specialists / total NYSE short sales) falls below 30%, specialists are buying and it's a bullish sign to smart money technicians.

When the spread between high and low quality bonds widens, the confidence index decreases, indicating a bearish market. Decreasing debit balances in brokerage accounts indicate that astute traders are selling stocks, which also indicates a bearish market. Relative Strength is not considered a smart-money indicator.

17.When technical analysts say a stock has good "relative strength," they mean the:

A)   recent trading volume in the stock has exceeded the normal trading volume.

B)   total return on the stock has exceeded the total return on other stocks in the same industry.

C)   stock has performed well compared to other stocks in the same risk category as measured by beta.

D)   ratio of the price of the stock to a market index has trended upward.

The correct answer was D)

This is the definition of relative strength. When the ratio of the stock price to the market price increases over time, the stock is out-performing the market.

18.Which one of the following would be a bearish signal to a smart-money technical analyst?

A)   The T-bill Eurodollar spread widens.

B)   The ratio of short sales by specialists to total short sales becomes abnormally low.

C)   The differential between high-quality and low-quality bonds decreases.

D)   The debit balances in brokerage accounts increase.

The correct answer was A)

Smart-money technicians reason that in times of international crisis, this spread will widen as money flows to a safe haven in U.S. T-bills.

Increasing debit balances in brokerage accounts and an abnormally low ratio of short sales by specialists to total short sales are bullish indicators to smart-money technicians. Although the spread between high and low quality bonds is a smart-money technician indicator, when the spread narrows, the confidence index increases, indicating a bullish market.

19.A time series calculated as the ratio of the average yield of 10 top-grade corporate bonds to the average yield on Dow Jones 40 bond is known as:

A)   Lehman Brothers "GAP" Index.

B)   Salomon's High yield index.

C)   breadth index.

D)   confidence index.

The correct answer was D)    

This is the definition of the confidence index. In periods of confidence, investors sell quality bonds and buy lower quality bonds looking for yield.  Quality bond prices will fall and their yields rise.  Lower grade bond prices will rise and their yields fall.  Thus, the CI ratio will increase during periods of confidence (e.g., from .07/.10 = .7 to .08/.09 = .89).  Note that the CI moves in the opposite direction of yield spreads.  In periods of confidence, yield spreads narrow and the CI gets bigger.  In periods of pessimism, spreads widen and the CI falls.  Caution:  On past exams, CFA Institute asked what happens when the spread narrows or widens, not what happened to the confidence index.

20.Which of the following would signal a technical analyst to expect a sharp increase in demand for a stock?

A)   The spread between the yield on high-quality and low-quality bonds widens.

B)   Movement into the analyst's resistance level range.

C)   Price movement into the analyst's support level range.

D)   When the specialists short sale ratio is above 50 percent.

The correct answer was C)

Support and resistance levels. Most stock prices remain relatively stable and fluctuate up and down from their true value. The lower limit to these fluctuations is called a support level – the price range where a stock appears cheap and attracts buyers. The upper limit is called a resistance level – the price range where a stock appears expensive and initiates selling.

Generally, a support level will develop after a stock has experience a steady decline from a higher price level. Technicians believe that, at some price below the recent peak, other investors will buy who did not buy prior to the first price increase and have been waiting for a small reversal to get into the stock. When the price reaches this support price, demand surges and price and volume begin to increase again.

Generally, a resistance level tends to develop after a stock has experienced a steady decline increase from a higher lower price level. Technicians believe that the decline increase in price will cause some investors who acquired the stock at a higher lower price to look for an opportunity to sell it near their break-even points. Therefore, the supply of stock owned by investors is overhanging the market. When the price rebounds to the target price set by these investors, this overhanging supply of stock comes to the market and dramatically reverses the price increase on heavy volume.

When the spread between high quality and low quality bonds widens, the confidence index decreases, indicating a bearish market (and likely decreased demand for the stock). Likewise, a specialist short sale ratio over 50% indicates a bearish market.