Monthly Archives: July 2017

Market Overbought

Last week, sector sentiment gleaned from the Twitter stream had every sector positive. When this occurs a short term market top materializes usually within the following week. Once in a while, the sectors will paint another week with all of them in positive territory, then the top comes. Basically, when every sector is being bought aggressively it signals that the market is overbought.

 

Another sign that the market is overbought comes from trader’s price target tweets for the S&P 500 Index (SPX). There are virtually no tweets calling for prices either above or below current price. This indicates that everyone is waiting to see what happens next, rather than projecting higher or lower prices. With the recent move higher, I suspect that traders are getting reluctant to add new positions or add more to existing positions.

 

Sentiment for SPX calculated from Twitter continues to confirm a mid term uptrend. 7 day momentum has plenty of room to withstand a short term top, then continue higher before a larger dip appears.

 

Breadth calculated between the most bullish and bearish stocks on Twitter continues to hold strong. This indicates that a long term top isn’t expected by traders because they’re still bullish on a large number of stocks and aren’t finding bearish plays.

 

Conclusion

The long and medium term uptrend is still intact, but the market is getting overbought. We’ll likely see a dip this coming week.

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Next Target 2500

The S&P 500 Index (SPX) held the level everyone was watching and tweeting at 2400. Then it cleared the Twitter resistance level at 2450. Now, traders are tweeting 2500 as the next stop.

 

Not only did SPX hold above support, it held above its uptrending sentiment line. This indicates we should continue to rally (probably to 2500 before a pause).

 

The count of bullish stocks on Twitter has suffered lately, but made a strong move higher this week as SPX rallied. This is a good sign that the consolidation is over and buyers are once again enthusiastic.

 

Conclusion

Support, sentiment, and breadth all held critical levels during the last dip. Now, we should rally for a while.

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Make or Break Time

It’s make or break time for the market. Sentiment for the S&P 500 Index (SPX) is sitting right on top of its confirming uptrend line. A clear break of this line would indicate that the bulls are retreating and the bears have gained control. It would most likely result in SPX falling below 2400.

 

Support and resistance levels gleaned from the Twitter stream for SPX show how critical the 2400 level is. Everyone is talking about 2400 and almost nothing else. There aren’t any clear support levels below 2400 so if it breaks we could see a waterfall type decline as everyone panics.

 

The recent weakness is finally having a negative impact on the number of bullish stocks on Twitter. This indicates that fewer stocks have enthusiastic buyers. The bearish count is still low, which means sellers aren’t materializing yet.

 

Conclusion

The market is at a critical point, 7 day momentum and sentiment is on the line between bullish and bearishness, there isn’t any clear support below 2400, and enthusiastic buyers are drying up. If the market can’t rally from here, it’s likely that 2400 will break and the decline after that will be swift.

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