During the past week it appears that investors are starting to test the water. As the market retested the August lows, traders on Twitter started to accumulate more than just the extremely beaten down stocks. The one week bullish list shows a number of stocks that have corrected roughly 20% from their recent highs. This is in contrast to the previous lists that mostly held stocks that were down 35% or more. This is a good sign that suggests market participants are taking a chance that the recent lows will hold and using it to buy relatively strong stocks.

Unfortunately, the bearish list still contains some recent leaders such as Apple (AAPL) and Tesla (TSLA). It seems that every week another leader is toppled. This is evidenced by the number of bullish stocks continuing to decline. Meanwhile the number of bearish stocks looks like it’s ticking up again. The market is getting to a critical point where it appears that another trip to the August lows will likely have the number of bearish stocks outnumbering the bullish ones. If that occurs breadth from the Twitter stream will turn bearish on a long term time frame which will indicate that much more pain is ahead.

7 day momentum and sentiment from the Twitter stream for the S&P 500 Index (SPX) is trying to break its recent downtrend line. This would be the first positive sign that the worst may be behind us. Daily momentum has started printing readings above zero on days the market rallies. Although, the readings are in the low single digits they are at least positive. Over the past month even rallies had mostly negative prints.

Support and resistance levels generated from the Twitter stream show traders chasing price. Tweets are coming after an upside price level is reached instead of in anticipation of a rally. Notice the lack of upside price targets on the chart below. There just isn’t any hope for higher prices. Most traders are still looking down. The 1800 and 1820 levels on SPX are still the most tweeted areas other than the recent lows near 1865. The overall picture is resignation that 1865 will likely break lower and 1820 will be tested.

Sector sentiment shows a few signs of hope with technology and consumer discretionary showing positive readings. The defensive sectors were negative this week which is a healthy sign the bulls want to see continue.

Conclusion

Market participants are starting to test the water. Relatively strong stocks were bought on this last dip, 7 day momentum is trying to break its downtrend, and traders are starting to chase the market higher. The biggest problem I see is the number of bullish stocks continues to decline. If we keep losing leaders this market will likely go much, much, lower.