Monthly Archives: January 2017

Healthy Rally

A few weeks ago sentiment for the S&P 500 index (SPX) calculated from the twitter stream broke out higher from a triangle pattern. I mentioned that this usually indicates higher prices ahead. It took some time, but the market finally responded. Now we’re watching the confirming uptrend in sentiment. If it breaks expect a larger consolidation.

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I also mentioned in that post that there is a line of resistance at 2300 for SPX. The market approached that level on Wednesday and has now paused. This is just what we’d expect when the tweets have been coming sporadically for a few months. If the market can clear 2300 then 2330 is the next level of resistance. A downturn here should hold 2250 unless we start to see tweets for a much lower level.

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Breadth is indicating enthusiastic buying with a surge higher in the number of bullish stocks on Twitter.

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Sector sentiment is showing just what we’d like to see too. Positive reading in all but the defensive sectors of Consumer Staples, Utilities, and Health Care.

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Conclusion

The market finally broke out of its range. All sentiment readings suggest this is a healthy move that should resume after a bit of consolidation at the 2300 resistance level.

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Bullish Sentiment on Twitter – But Resistance Just Above

Sentiment for the S&P 500 Index (SPX) on the Twitter stream broke its triangle pattern to the upside. This suggests that this rally has more steam in it. Keep an eye on the confirming uptrend line from 7 day momentum. If it is broken then some consolidation will likely occur.

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Unfortunately, traders are tweeting 2300 on SPX as an upside target. This indicates the market only has another 25 points to rally before pausing.

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Breadth calculated between the most bullish stocks an Twitter and the most bearish is still holding up. The bearish count isn’t rising and the bullish count is falling slightly. This suggests a wait and see mode by traders.

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Conclusion

Market participants expect higher prices, but traders are only looking up to 2300 on SPX. We’ll likely see a rally to 2300 that stalls before moving higher again.

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Not Much Hope at a Critical Point

Over the past several weeks, sentiment for the S&P 500 Index (SPX) has been slowly deteriorating as the market traded sideways to down. This week the market turned back up, and with it sentiment. This has painted a triangle pattern in 7 day momentum. When this occurs it creates an inflection point where the market picks a direction that usually lasts for a few weeks. When the triangle pattern in sentiment is broken, it points the next direction in SPX.

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Unfortunately, price targets tweeted by traders don’t show any hope for higher prices. This indicates that traders aren’t yet convinced the current rally will hold.

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Breadth is holding up fairly well even in the face of the number of bullish stocks declining. This is because the number of bearish stocks is declining too. It indicates that traders are nibbling at longs, and not shorting much.

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One hopeful sign comes from the most bullish stocks on twitter list over the past week. It is starting to broaden out among sectors again. Here’s a comparison of the one week, one month, and three month bullish lists.

Conclusion

7 day momentum is painting a triangle. When it breaks, the market will likely trade the same direction for a few weeks. Unfortunately, traders price targets don’t hold much hope for higher prices. Looks like everyone is in wait and see mode.

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