Over the past week the market worked off the over bought condition created in the Trade Followers momentum indicator calculated from the Twitter stream for the S&P 500 index (SPX). The daily prints have been mostly positive even though the market was declining. This indicates market participants on Twitter believe that healthy consolidation is occurring rather than the start of a new down trend. 7 day momentum continues to hold its up trend line which confirms the move higher out of the January lows as well.
Breadth calculated between the number of bullish and bearish stocks on Twitter has returned to very healthy levels due to the low number of bearish stocks. The number of bullish stocks has continued to make lower highs since last July, but the number of bearish stocks isn’t rising. This indicates that market participants are looking for value. They aren’t pushing weak stocks lower, but at the same time they’re not aggressively pushing stocks to new highs. The market should continue to hold up well until the number of bearish stocks starts to rise significantly.
Support and resistance levels gleaned from Twitter for SPX are showing a bit more uncertainty than momentum and breadth. Most of the tweets have targets at either the top or bottom this year’s range. Support is at 2040 and resistance is near 2120. This wide range indicates traders are waiting for a resolution before making a commitment.
Sector sentiment is also showing some weakness with consumer discretionary stocks below zero and defensive sectors showing strength. This indicates that investors are getting more cautious in their portfolio construction.
Overall sentiment from the Twitter stream indicates the market is ready to move higher, but many traders are waiting for new highs before committing money. The number of bullish stocks isn’t rising rapidly and strong resistance stands at 2120. Until market participants get more conviction expect the market to drift higher with some chop along the way.