Author Archives: TradeFollowers

Not Much Damage

We’ve had another week where the Nasdaq 100 (NDX) was volatile and suffered a bit of damage, but sentiment for the S&P 500 Index (SPX) is still holding up. As long as 7 day momentum stays above it’s current trend line the market should continue to advance.

 

A lot of people are looking up to 2500 as the next target for SPX. Of course, they’re all waiting to see if 2400 holds too.

 

Breadth is showing improvement mainly due to a decrease in the bearish count.

 

Conclusion

Everyone is waiting to see if 2400 on SPX hold. However, they’re waiting with optimism that volatility in NDX won’t spill over into SPX.

 

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Still Bullish

Even with Friday’s ugly market action, investors and traders on Twitter remain bullish. The daily sentiment and momentum indicator for the S&P 500 Index (SPX) had a positive print on Friday. Seven day momentum remains in an uptrend and it’s likely the market will as long as that uptrend is intact.

 

2450 on SPX is a resistance level that has been tweeted since January. Once the market passed 2400, then 2450 was the next likely place to pause. It looks like we’ve got that pause. Support is at 2400 and 2350. I expect the market to hold somewhere in that area unless the trend in 7 day momentum is broken to the downside. One other thing of note, traders’ tweets didn’t show any fear on Friday. Notice the lack of tweets calling for prices below 2400 on SPX.

 

Breadth is repairing itself with the bullish count rising and the bearish count falling. This is another indication that we’re likely seeing a pause rather than an intermediate term top.

 

Conclusion

Bullishness still reigns. Until we see fear in traders’ price targets, a significant decline in the count of bullish stocks, or a break of the confirming trend line in 7 day momentum we should expect the market to move higher (even if it needs to rest for a week or so).

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Not Much Hope

Last week, we were looking for a break higher in 7 day momentum and sentiment to signal a resumption of the rally.  We got that break and the S&P 500 Index (SPX) finally made a clear move above 2400. Unfortunately, most of the bullishness was observation of new highs and not excitement for even higher prices.

 

The move higher stopped right at the 2420 resistance level tweeted by traders. The next resistance area is 2450, but there aren’t many tweets calling for higher prices so it may be a slow slog higher.

 

Another drag on the market is the number of bearish stocks on the Twitter stream is rising. This isn’t a good sign when the market is at all time highs because it indicates a thinning market.

 

Conclusion

The market made new highs, but without much hope. Higher price targets are sparse, the count of bearish stocks is rising, and individual tweets don’t have a lot of enthusiasm for higher prices. It’s likely that any price gains will come sluggishly.

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Waiting for Signs of Bullishness

I’m busy this weekend, but here are some updated charts with a conclusion to follow.

 

 

The S&P 500 Index (SPX) is in a well defined range of 2300 to 2400 with minor support at the last lows near 2320. 7 day momentum and sentiment from Twitter for SPX is in a clear short term downtrend. If that trend is broken to the upside it should confirm a resumption of the rally. The number of bullish stocks on Twitter is rising, but is still diverging from price. Put all together, we’re waiting for more bullishness to show up in 7 day momentum and the bullish count so we can finally make a clear break above 2400 on SPX.

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Thinning Breadth Near All Time High

On Friday, the S&P 500 Index (SPX) made it back to challenge 2400, but the number of bullish stocks on the Twitter stream is diverging from price. This indicates that traders are buying fewer stocks as the market pushes higher. Other signs of sentiment from Twitter suggest that SPX should move above 2400, but won’t have broad based support. Bulls want to see the number of bullish stocks increase if the market breaks out significantly.

 

7 day momentum and sentiment calculated from tweets for SPX has painted a healthy pattern where sentiment turned up ahead of price and is now consolidating at an expected resistance level. This pattern suggests the market should break higher, but may need another few days of consolidation.

 

Support and resistance gleaned from Twitter for SPX shows a clear range between 2300 and 2400. There is also strong support at 2320. If the market can get above 2400, it should move fairly quickly to 2450 as that area is getting calls from a large number of traders.

 

Conclusion

Sentiment for the market is indicating we should get a clear break above 2400 on SPX, but breadth is thinning. This puts the market in danger of a larger decline when the rally concludes. Bulls want to see the bullish count rise if the market breaks out.

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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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Warning Signs

We’re seeing some signs warning that sentiment for the S&P 500 Index (SPX) gleaned from Twitter is at a make or break point. The thing that is most concerning is that price is so close to an all time high as sentiment is deteriorating toward bearish levels. First let’s look at 7 day momentum and sentiment. It put in a low a few weeks ago that was at the bottom of the normal bull market range. Now it is attempting to turn down from zero. If it does turn down and break below the last low it will be very bearish for the market. On the bright side, price is lower, but 7 day sentiment is higher. This gives this indicator a tiny positive divergence, which could mean the low in sentiment is in place. If that is the case, price should follow higher. Bulls should be looking for a clear break back above zero on this chart.

 

Breadth calculated between the count of bullish and bearish stocks on the Twitter stream is also deteriorating. The bullish count is sitting barely above the normal bottom of the bullish range. Once again, it’s happening without much price weakness in SPX. A break lower in the bullish count will likely be associated (or followed) by a big break lower in price for the major indexes. You can see the daily chart here.

 

Price targets for SPX gleaned from Twitter show a cluster of support in the 2320 to 2330 area. These targets, all at different prices, have a fairly even distribution for the number of traders calling for each of them. This means that price could hold in that area, but it isn’t strong support. We prefer to see everyone calling for the same price. Notice how we had a straight line of resistance at 2400 that started in early February. When price reached that level everyone who wanted to sell or take profits did so at the same time. If price falls into the 2320 to 2330 range, the buyers will show up at different times which might not be enough to stop the slide.

 

Conclusion

We’re seeing several warning signs that the market needs to turn back up right now or suffer a much larger drop. 7 day sentiment and the count of bullish stocks are both at the bottom of their normal bull market range. Support below the market is scattered rather than solid. All of this is happening with price very close to all time highs, which suggests that any move lower in price will be a large one.

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Not Much Change

Over the past week, there isn’t a lot new to report regarding sentiment from the Twitter stream. The most significant item comes from the number of bullish stocks. It continues to fall even though the market moved up a bit. This indicates that traders aren’t aggressively buying the most bullish stocks near a market high. This isn’t a good sign for the bulls.

 

7 day momentum and sentiment for the S&P 500 Index (SPX) has moved back up to the zero line. The bulls want to see this break higher. The bears want it to turn down from the zero level as it will likely result in a larger decline in SPX than we’ve seen so far this year.

 

Support and resistance levels stayed the same. 2400 is strong resistance. 2350 and 2300 are support.

 

Conclusion

A weak response from the bullish count and 7 day sentiment sitting at zero suggest there aren’t very many committed bulls. Keep an eye on 7 day sentiment, because a turn down from here will likely have serious consequences.

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Buying Stalls

Over the past few weeks the number of bullish stocks on Twitter have fallen sharply. This indicates that buyers of the most bullish stocks dried up as the S&P 500 Index (SPX) pushed up into the 2400 area. Although buyers are slowing down, the sellers of bearish stocks haven’t materialized. That condition is keeping overall breadth at healthy levels.

 

Sentiment for SPX calculated from the Twitter stream has finally made a decisive break of the confirming uptrend line we’ve been watching. It corresponded with a break down in price as we expected. Now we’re watching for an upturn as the first indication that a low may be in place.

 

In our February 20th post we noted that 2400 on SPX was a strong resistance level. At the time, we thought the market would pause and then move to the 2400 level. Instead, the market made two quick jumps in price to touch 2400 and then backed away. There is small support at 2350 on SPX and larger support at 2300. Resistance is still above at 2400.

 

Conclusion

We’ve finally got the dip we’ve been expecting due to the flagging sentiment and lack of enthusiasm from buyers of the most bullish stocks. Now we’re watching to see if 2350 on SPX holds or if we’ll get a trip to 2300. Keep an eye out for an upturn in 7 day momentum that is accompanied by a resurgence in the bullish stock count for the first clues that a bottom has been put in place.

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