Monthly Archives: August 2016

Time for a Short Term Top

Sector sentiment from the Twitter stream is signalling that a short term top is near. In the past, we have almost always had a short term top within a few days when all sectors had positive sentiment. On the few instances that a top didn’t occur, the next week had all positive sectors again… then the top came. Buying across all sectors near a high in an overbought condition with a good track record of marking highs.

160814Sectors

Price targets gleaned from trader’s tweets is showing there isn’t much upside potential. Almost everyone is tweeting 2200 for the S&P 500 Index (SPX), but no higher. That suggests heavy resistance at that level, which makes it a good place for the short term top to start.

160814spxSR

Daily sentiment readings for SPX are somewhat lackluster. This is keeping 7 day momentum and sentiment hovering above the zero line even though the market is trying to push higher. This indicator is showing a lack of conviction, which adds weight to the impending top argument.

160814SPX

Another indication (in addition to sector sentiment) that the buying is widespread comes from breadth calculated between the most bullish stocks on Twitter and the most bearish. The bullish count continues to rise with the market. That indicates a greater number of stocks are being aggressively bought. If you look at the list of bullish stocks from the last month you’ll see the buying is spread across leading sectors, which is a positive sign for the intermediate term.

160814Breadth

Conclusion

Lackluster daily sentiment, overbought sector sentiment, and very few tweets calling for prices above 2200 on SPX suggest a short term top is near.

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Bullish Signs

The Twitter stream is finally being filled with bullishness from traders and investors tweeting about individual stocks and the S&P 500 Index (SPX). The tweets for SPX have shown enough bullishness during the last three minor consolidation periods to keep 7 day momentum and sentiment mostly above zero. This is healthy bull market behavior. Bull market consolidations usually see this indicator experience small dips below zero that are quickly recovered.

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The number of bullish stocks on Twitter has risen back to bull market levels. This indicates buying in a broad number of stocks. This should help support a further rally.

160807breadth

On the slightly negative side, we have price target tweets for SPX. Traders are only expecting a move to 2200. There is very little hope for higher prices. As a result, we should see some selling and consolidation at that level.

160807spxSR

Conclusion

Bullishness is clearly back, but the market will likely consolidate once SPX reaches 2200.

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