Thinning Breadth Near All Time High

By | May 7, 2017

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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