Momentum from StockTwits and Twitter for the S&P 500 Index (SPX) has finally cleared their extreme overbought conditions. Unfortunately, they are now in danger of breaking their confirming uptrend lines. A break will indicate that more weakness is ahead for SPX. The pattern being painted by social media momentum also indicates some chasing is occurring. Traders and investors seem to be reacting to price more than any other indicator which adds some instability. To add insult to injury the longer the consolidation has gone on the more negative market participants have become. All of the above put the odds in favor of lower prices before the consolidation ends. As you know, I prefer to see a positive divergence from the Twitter and StockTwits streams when price is falling. This occurred in early August and indicated that the market should move to new highs. The lack of a positive divergence suggests at least one more dip before a sustained market advance.
Comments
Log in or sign up to join the conversation.