Over the past several weeks, sentiment for the S&P 500 Index (SPX) has been slowly deteriorating as the market traded sideways to down. This week the market turned back up, and with it sentiment. This has painted a triangle pattern in 7 day momentum. When this occurs it creates an inflection point where the market picks a direction that usually lasts for a few weeks. When the triangle pattern in sentiment is broken, it points the next direction in SPX.
Unfortunately, price targets tweeted by traders don’t show any hope for higher prices. This indicates that traders aren’t yet convinced the current rally will hold.
Breadth is holding up fairly well even in the face of the number of bullish stocks declining. This is because the number of bearish stocks is declining too. It indicates that traders are nibbling at longs, and not shorting much.
One hopeful sign comes from the most bullish stocks on twitter list over the past week. It is starting to broaden out among sectors again. Here’s a comparison of the one week, one month, and three month bullish lists.
7 day momentum is painting a triangle. When it breaks, the market will likely trade the same direction for a few weeks. Unfortunately, traders price targets don’t hold much hope for higher prices. Looks like everyone is in wait and see mode.