Monthly Archives: April 2017

Still Looking Healthy But Risky Too

Even with last Thursday’s drop in price, sentiment for the S&P 500 Index (SPX) is still showing healthy signs. Take a look at price targets tweeted by traders on Twitter. Notice that the first time SPX dipped near 2320 traders were tweeting price targets as low as 2200. On the current decline, traders aren’t so fearful. Instead, they’re tweeting support in the 2320 and 2300 areas.¬†This is both good and bad. The good news is that the market should attempt a rally at one of those two levels. The bad news is that there is no support below 2300 so if that level breaks it could get ugly very quickly.

 

Another good sign comes from the number of bullish stocks on the Twitter stream. It continues to rise even as the market is falling. This is a positive sign that suggests traders are buying the most bullish stocks during this decline.

 

7 day momentum and sentiment for SPX is now at the bottom of its normal bullish range. This is another good/bad sign. The good news is that the market should rally soon if we’re still in bull mode. The bad news is that any further deterioration in sentiment will likely be accompanied by a large move downward in price.

 

Conclusion

Sentiment from Twitter is still healthy, but there are danger signs too. The healthy signs are less fear in price targets, 7 day momentum still inside the bullish range, and an increase in the number of bullish stocks. The risk comes if the market can’t hold 2300 or 7 day momentum breaks below its bullish range. You can see the daily chart here.

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So Far So Good

I’m seeing some positive signs this week from stock market sentiment on Twitter. First, 7 day momentum and sentiment for the S&P 500 Index (SPX) has broken its downtrend line. This often results in price moving higher because sentiment has turned bullish. Price is trying to move higher, but isn’t quite there yet. As long as 7 day momentum can hold the newly established uptrend line we should expect to see an attempt at new highs.

Stock Market Sentiment From Twitter

 

Breadth calculated between the most bullish and bearish stocks on Twitter is also improving. Most of the improvement comes from an uptick in the bullish count. This is what we want to see because it suggests traders are pushing the most bullish stocks higher as SPX is struggling. It should lead SPX higher.

 

Another good sign comes from traders price targets for SPX that are gleaned from the Twitter stream. We’re seeing scattered calls for 2450. However, 2400 is still showing as a strong resistance level. Expect the market to at least pause there before moving higher.

Support and Resistance for the Stock Market from Twitter

 

Conclusion

The consolidation on SPX is showing good support from sentiment on the Twitter stream. The number of bullish stocks is rising, 7 day momentum has started an uptrend, and traders are calling for prices above all time highs. So far, so good, but keep an eye on the newly established uptrend in 7 day momentum. If it breaks, we will likely need more consolidation before attacking new highs.

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