Monthly Archives: February 2017

Short Term Top Ahead

Last week, sector sentiment from the Twitter stream gave a warning. It is showing an overbought condition where every sector has positive sentiment. When this has occurred in the past, it has almost always been followed by a short term top within a few days.

 

At Downside Hedge I highlighted another indicator that has a good track record of calling short term tops or consolidation periods. It is also warning.

Sentiment for the S&P 500 Index (SPX) is showing a bit of lag in the trend. As price is moving higher, sentiment is stalling.

 

On the bright side, the count of bullish stocks is rising at a steady pace. This indicates that the breakout to new highs is being met with widespread optimism.

 

Another sign of optimism comes from traders price target tweets for SPX. The Twitter stream is starting to see a lot of calls for 2400.

 

Conclusion

We’re likely due for a short term top. Sector sentiment is overbought and sentiment for SPX is stalling. Once a bit of consolidation occurs, it appears the market should move higher due to widespread buying and calls for higher prices.

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Buying the Dip

This past week saw traders buying the dip (well if you can call it a dip). If you look at the count of bullish stocks on the Twitter stream you can see that traders were buying more stocks as the market reacted to resistance near the 2300 level on the S&P 500 Index (SPX). This is a very good sign for the market going forward.

Stock Market Breadth From Twitter Sentiment

 

You can see the stocks that are being bought by looking at the most bullish list. You can use this bullish sentiment list to sort by timeframe.

Bullish Stocks on Twitter

 

Another positive sign comes from 7 day momentum for SPX. It is still confirming the uptrend in price. If the sentiment uptrend stays intact the market should be able to break above 2300.

Twitter Sentiment for the Stock Market

 

One note of worry is that traders aren’t calling for prices above 2300 on SPX. The hope from the last attempt to break higher has disappeared. With support at building a fairly solid line at 2250 we may be seeing the first signs of a rangebound market (as traders go into wait and see mode).

Stock Market Support and Resistance from Twitter

 

Conclusion

Sentiment for the market is still showing positive signs. We’ve had the pull back we predicted in mid January so now the market should be able to break 2300. The only fly in the ointment is the lack of tweets calling for higher prices.

 

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