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.
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.