On July 23rd, I posted that a short term top was near due to overbought sector sentiment. We’ve now had a short term dip, but is it enough? If we look at 7 day momentum and sentiment for the S&P 500 Index (SPX) it has fallen to the level of minor dips over the past two years. However, it still has some room to fall if we’re going to see a more significant dip in a longer term uptrend.
Breadth calculated between bullish and bearish stocks on the Twitter stream is declining, but the bullish count shows an intermediate term negative divergence, and a short term positive divergence with price. The bullish count will likely give us a short term direction by breaking the triangle. If it can break higher it should signal that new highs are ahead.
The most informative long term indicator from Twitter this week is support and resistance levels. There is now a clear range between 2400 and 2500 on SPX. If either level breaks it will show us the long term trend.
It decision time for the short term. 7 day sentiment is where short term dips end, but still has some room for a longer dip (and remain bullish long term). The count of bullish stocks is painting a triangle that could break either way. The longer term trend should be decided by a break of either 2400 or 2500 on SPX.