Twitter momentum for the S&P 500 index (SPX) has been warning for the last two weeks that the market was vulnerable to a decline. That warning is still in place, however 7 day momentum is starting to hold up in the face of market weakness. This often precedes an end to the decline. It’s still to early to make a bottom call so for the moment we need to watch the confirming down trend line in 7 day momentum. If it is broken to the upside it will most likely mark the end of the selling.
Breadth calculated between the number of stocks with strong support on Twitter against those with weak has turned down. This decline is a result of fewer bullish stocks and an increase in the number of bearish stocks. I consider the market to be in a long term uptrend as long as breadth is above zero. This indicator is suggesting some chop, but not a market top…yet.
Support and resistance levels gleaned from the Twitter stream proved to be a good guide to the action in the S&P 500 index (SPX) over the last few weeks. After breaking below 2100 on the S&P 500 Index (SPX) the market fell to our first support level of 2065. It paused there then sliced through to our next level of support at 2040. It is now holding the middle of the range between 2040 and 2065. I consider 2040 to be a critical must hold level. It has been tweeted most frequently as support for over six weeks. If it breaks there is minor support at 2020, but not much below so some caution is warranted below 2040.
Above the market 2065 is strong resistance with 2085 minor resistance. The narrow range between support and resistance with a lack of tweets either above or below the current range suggest any move out of the range will be swift.
Sector strength from Twitter is showing some encouraging signs. The defensive sectors are negative while Financials and Consumer Discretionary are showing strength. When the market starts a large decline we more often see strength in the defensive sectors. A decline this week with strength from Consumer Staples and Utilities would suggest an intermediated term correction is ahead.
The current message from the Twitter stream leaves us waiting for more information. The market is trading between long established support and resistance levels, 7 day momentum is weak, but trying to improve, and sectors show some bullishness. Watch the range between 2040 and 2065 on SPX. If the market breaks above or below those levels it will most likely be the start of the next large move.