Monthly Archives: May 2016

Tepid Bulls

This week finally saw a bit of optimism on the Twitter stream for the S&P 500 Index (SPX). However, the overall response was fairly tepid. First let’s look at breadth calculated between bullish and bearish stocks. The market had a strong move in price last week, but breadth traded sideways. The number of bullish stocks didn’t increase much which indicates the buying wasn’t enthusiastic.

160530breadth

Next we have price targets for SPX gleaned from the Twitter stream. Notice that no one is calling for new all time highs even though they’re only 35 points away. Not the type of response that tells me people are getting on board this rally. My read of this chart is that market participants won’t get excited unless we reach all time highs.

160530spxSR

Daily sentiment did have a few strong readings this week so we have a small sign that the bears are breaking. 7 day momentum and sentiment for SPX had a break below its triangle then a quick reversal to break above it. This shows continued uncertainty by market participants. It looks to me like chasing rather than motivated and hopeful buyers.

160530spx

Sector sentiment was strong almost across the board. Weakness in utilities helps the bull case, but I would have liked to see weakness in the other defensive sectors too (consumer staples and health care). Basically, I think this rally needs a rotation away from defensive stocks and into leading sectors (financial, technology, consumer discretionary, etc.) before we can get a sustained move higher.

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Conclusion

The bears are starting to crack, but the bulls aren’t enthusiastic. Breadth continues to lag, price targets are conservative, 7 day sentiment can’t pick a direction, and defensive sectors are still being bought. It looks like the market will need to break out to new all time highs before the bears turn to bulls.

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Deterioration

Over the past week, sentiment calculated from the Twitter stream for the S&P 500 Index (SPX) suffered some deterioration. Daily prints were mostly negative and 7 day momentum is trying to break the lower bounds of its triangle. A break lower will likely bring with it heavy selling.

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Breadth continued its decline as well. Bulls want to see breadth turn up if the market rallies.

160522breadth

On the bright side, tweets for substantially lower prices dried up. The calls for a trip back to the February lows are almost non existent. Most of the tweets this week had price targets between 2020 and 2040. Both of those areas are now critical support. If those levels are broken to the down side (along with the 200 dma near 2011) we should expect an acceleration of the selling. If however, the market can hold 2040 this coming week it will bode well for the bulls.

160522spxSR

Conclusion

Although sentiment deteriorated, fear dried up. The most important things to watch this next week will be the 2020 to 2040 area on SPX and 7 day momentum. If 7 day momentum breaks lower it will probably signal a resumption of the down trend that will crash through 2020 quickly.

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Lingering Fear and Bearishness

During the strong rally out of the February lows, 7 day momentum and sentiment for the S&P 500 Index (SPX) generated from the Twitter stream only had one minor move above zero. Daily prints for Twitter sentiment continue with a pattern of prints mostly below zero. That pattern has been in place since July 2015. Market participants just can’t get bullish. On the bright side, since late February, they aren’t getting very bearish either. Another important pattern on this chart is the triangle being painted by 7 day momentum. If the triangle is broken the odds favor a sustained move by price in the same direction. You can see the daily Twitter sentiment chart for SPX here.

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As a sign of lingering fear, we have price targets tweeted by traders on Twitter for SPX. The February low near 1810 is still being tweeted as a possible retracement level. Fear of the January decline has slowed a bit, but the current dip is bring it back. Currently, the 2040 area is the most important level. It has been both support and resistance for over a year. The bulls want this level to hold, however 2020 on SPX is a minor support level near the 200 day moving average that may act as a magnet.

160515spxSR

Breadth calculated between the count of bullish and bearish stocks on Twitter over the past month continues its slow decline. The bullish count is falling and the bearish count is rising. Bulls want to see all three trends broken. You can see the daily breadth chart here.

160515breadth

Sector sentiment was mixed over the past week.

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Conclusion

Bearishness and fear continue to linger. 7 day momentum can’t get above zero, daily sentiment readings continue to paint a bearish pattern, there are renewed calls for a decline to 1810, and breadth continues to decline. For the moment the bears are in control. Bulls want to see 7 day momentum move back above zero and its down trend line accompanied by breadth breaking above its down trend line.

 

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Not Much Change

Not much has changed from last week. The most significant change comes from support and resistance levels for the S&P 500 Index (SPX). Notice how fear of a return to the February lows popped up as soon as we got a day or two of decline. Another important thing to note is how the market paused at the first Twitter support level of 2080, then when that broke the market caught at the next most tweeted level of 2050.

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We’re still waiting for a break one way or another in 7 day momentum for SPX. If it goes the same direction as price then we’ll likely see a sustained move.

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Breadth is crawling sideways to down. The number of bullish stocks moved up in the face of declining prices, but the number of bearish stocks rose as well.

160501breadth

Conclusion

We’re still waiting for confirmation of a move from stock market sentiment from Twitter and breadth.

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