Monthly Archives: September 2016

Another Week — Same Story

Not much has changed from last week regarding sentiment calculated from Twitter for the stock market. 7 day momentum is still compressing between a bull market oversold level and a confirming downtrend line. When one of these lines break it should point the direction of the market for the next few weeks.

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The number of bullish stocks is still well above bull market levels. As long as it holds, there is no threat to the intermediate term up trend. The bearish count fell slightly which is a positive as it suggests short sellers are taking profit.

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Support and resistance levels gleaned from Twitter for the S&P 500 Index (SPX) still shows 2200 as a big resistance level. 2150 was added as resistance this week so the bulls will have to push above it before a clear run to 2200 can begin. Below the market, 2120 held on several occasions this past week and garnered the most chatter on Twitter. This makes it a must hold level or it’s likely we’ll see a fast slide lower. 2100 and 2150 are the next levels of support.

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Conclusion

We’re still watching the triangle being painted by 7 day momentum. It should point the direction of the market when the triangle is broken. If the number of bullish stocks falls below its bullish oversold level it will be a threat to the intermediate term trend.

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Short Term Top As Expected

On 8/14 we wrote that a short term top was close based on overbought sector sentiment, lackluster daily sentiment, and strong resistance at 2200 on the S&P 500 Index (SPX). After that post, the market pushed just a bit higher then traded sideways to down until last Friday… when it fell of the cliff. Or at least it felt that way after so many days with little to no volatility. The daily print for Twitter sentiment for SPX on Friday brought out the bears, but not in enough force to create an initiation thrust. The reading was -18. We consider -20 near a short term top as a warning for more weakness ahead. The lack of an initiation thrust indicates the bulls are still in the fight and that they aren’t panicking yet.

7 day momentum and sentiment is compressing between a confirming downtrend line and the bottom of its “bullish” range. Whichever trend line is broken first will likely point the direction for a few weeks. The bulls need the “bullish” oversold level to hold.

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The number of bullish stocks on Twitter continues to hold above normal bull market levels, however the number of bearish stocks is rising steadily. This indicates that bears are finding stocks to short. Breadth is telling us that the intermediate term bull is still intact, but showing a bit of weakness.

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Support and resistance levels gleaned from the Twitter stream still show strong resistance at 2200 on SPX. However, there is very little support. Bulls want to see several levels of support tweeted if the market continues to fall as this will give us a place to catch.

160911spxSR

Conclusion

We got the short term top as expected, but sentiment isn’t indicating that this is a long term problem yet. 7 day momentum and the number of bullish stocks are still in bull market territory, and Friday’s large decline couldn’t generate an initiation thrust. Our first warning of something larger will come if the “bullish” lines on either 7 day sentiment or the number of bullish stocks is breached to the downside.

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