Monthly Archives: December 2016

2300, But No More

Traders are still only looking up to about 2300 on the S&P 500 Index (SPX). There is little fear for prices below the market. You can use the menu above to see the most bullish and bearish stock lists. Have a good holiday week!

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Support and Resistance

Posts from now through the holidays will be light… too much fun to be had, but we’ll try to at least update the support and resistance chart for the S&P 500 Index (SPX). Right now there is strong resistance at 2300. A cluster of support lies between 2240 and 2250. Below that is 2200.

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You can still see the sentiment chart for SPX here and the breadth chart here. The bullish list is here. The bearish list is here. Have a good holiday season!

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Time for a Rest?

Last week, we mentioned that we were finally seeing hope for higher prices in the S&P 500 Index (SPX) with tweets calling for 2220 and 2250. This past week the market blew right through both price targets and now traders are starting to call for 2300 as the next stop.

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As the market pushes higher, sentiment is starting to wane. Daily sentiment is falling with each move higher as more traders are either calling for a top or the need to consolidate recent gains. Seven day momentum is painting a lower peak and diverging from the market, which is another signal that this rally is getting tired in market participants minds.

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Breadth isn’t moving sharply higher due to the count of bullish stocks lagging price. This indicates that the move higher in the indexes isn’t being supported by a large number of individual stocks.

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Conclusion

Although there are scattered tweets calling for 2300 on SPX, sentiment for SPX is starting to diverge from price and sentiment for individual stocks is lagging sentiment for the indexes. It looks like a good time for the market to consolidate recent gains.

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Rotation Amid Overbought Conditions

Over the past three weeks (since the US election) we’ve observed a major rotation from safety into leading sectors by watching the bullish and bearish lists. Take a look at the bullish stocks on Twitter over the past 3 weeks and you’ll notice financials, consumer products, retail, and energy dominating the list.

Most Bullish Stocks on Twitter

Now lets look at the list of bearish stocks on Twitter over the past 3 weeks. Notice it is filled with defensive sectors such as consumer staples, utilities, and health care. By comparing the two lists you can clearly see the rotation underway.

Most Bearish Stocks on Twitter

Over the past week our sector sentiment calculated from Twitter shows the pattern continuing. This should portend higher prices over the intermediate term, but the rotation itself will cause a bit of chop in the indexes in the short term.

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Another sign that we may see some chop in the short term comes from extreme overbought readings in sentiment for the S&P 500 Index (SPX) calculated from the Twitter stream. Both the daily and 7 day readings are above “normal” bull market overbought readings. This usually provides some headwinds.

Twitter sentiment for the S&P 500 Index

On the positive side, traders on Twitter are finally starting to call for prices above current levels. This is bullish in that hope is overcoming skepticism.

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Breadth is holding steady as the number of bearish stocks on Twitter falls. This is another sign of a shift to bullishness by traders as they’re not looking to short a large number of stocks.

Stock market breadth from Twitter

 

Conclusion

The market is rotating into leading sectors and out of defensive sectors with extreme optimism. The extreme readings in daily and 7 day momentum suggest that we may need more of a pull back to relive some pressure — but it is December — so maybe a Santa Clause rally instead.

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