Monthly Archives: July 2016

Reluctant Bulls

Although the market needs a rest, sentiment for the S&P 500 Index (SPX) on the Twitter stream continues to show positive signs. For the past several weeks, daily sentiment has printed almost all positive numbers. 7 day momentum and sentiment finally made a decent break above bear market overbought levels. This indicates that traders and investors are acknowledging that the bull market is back… if somewhat reluctantly.

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From an individual stock perspective the number of bullish stocks on Twitter is still being constrained by bear market levels, however the stocks showing bullishness come from a wide range of industries. You can see the bullish list here. One positive note is that if the market does rally there are still a lot of stocks that aren’t being widely bought yet. They can provide fuel for the next move higher.

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Support and resistance gleaned from the Twitter stream for SPX still shows strong support at 2135 and 2100. Traders are targeting 2200 as resistance.

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Conclusion

Market participants are slowly turning into bulls, but aren’t extremely bullish on a large number of individual stocks. I suspect they’re waiting for the next dip to get aggressive. Likely support for a dip is between 2135 and 2100 on SPX.

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Encouraging Signs

With the market breaking to new highs, I’m seeing some encouraging signs from sentiment for the S&P 500 Index (SPX) computed from the Twitter stream. 7 day momentum and sentiment has moved above the level that has marked overbought conditions during the consolidation (bear market) that started in mid 2015. If it can make a decisive break higher and also hold above the bull market oversold level it will be very bullish for the market. It will indicate market participants getting excited about SPX moving higher. Daily sentiment still shows too much fear with large negative prints on down days. If that condition can clear on the next dip, then I suspect we’ll get a large follow through rally.

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Breadth is moving higher with a burst in the number of bullish stocks on the Twitter stream. This is exactly what I wanted to see if the market broke to new highs. This is an indication that investors are buying the breakout rather than selling into it.

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Support and resistance numbers gleaned from the Twitter stream for SPX show fear abating and some solid support at 2135 and 2100. Hope is returning with calls for 2200 and 2300. During bull markets traders tweet price targets well above current levels so the tweets for 2300 are very encouraging.

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Conclusion

Sentiment from Twitter for SPX is showing signs that the market finally wants to move higher. 7 day momentum is back to normal bull market levels, breath is improving, and traders are tweeting price targets well above the market.

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Waiting for a Direction

During the last rally, there haven’t been a lot of strong bullish signals being sent from sentiment on the Twitter stream. Instead,  it looks like everyone is waiting to see if the S&P 500 Index (SPX) can break to new all time highs.

First take a look at price target tweets gleaned from the Twitter stream. There aren’t a lot of tweets above the all time highs. This indicates that traders are waiting and/or chasing price. They are tweeting price after it is achieved rather than in anticipation of a move higher.

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Another sign of weakness is that 7 day momentum and sentiment from Twitter for SPX is still below bear market overbought levels. I’d expect a good break out to new highs to be accompanied by a move above the red line on the chart below. Without it, we may be seeing a bull trap.

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Breadth between bullish and bearish stocks is also discouraging. Although it is well above zero, it isn’t even close to levels normally associated with new all time highs. I’d like to see the number of bullish stocks expand quickly if the market breaks higher.

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Conclusion

Price is moving higher, but without huge support from sentiment. It looks like people are waiting to see if a break to new all time highs can be achieved and held before getting excited. On a positive note, if a break higher does occur sentiment has a lot of room rise before becoming overbought.

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