Not Believing Rally

Traders on Twitter (TWTR) and StockTwits are still waiting for a break of the current range before making any commitment to the market. As the S&P 500 Index (SPX) has oscillated in a range between 1990 and 2065 the Trade Followers momentum and sentiment indicators have continued to fall. The StockTwits community is getting more bearish as the range continues. The new up trend line from StockTwits has been broken to the downside which indicates there was no enthusiasm for last week’s rally. The Twitter stream was a bit more positive, but the move in SPX back to the top of the range only caused a small move in momentum. Market participants are waiting without a lot of faith that the recent highs will be broken.

 

 

Breadth calculated between the most bullish stocks on Twitter and the most bearish continues to print lower readings due to an increase in the number of bearish stocks.

 

 

A look at the weakest stocks on Twitter during the current consolidation shows many widely held companies. This explains why overall sentiment is so tepid even though the market appears to be in a healthy consolidation. SPX is only a few percentage points off all time highs, but individual portfolios are seeing an increase in positions breaking down. I mentioned last week that you should watch the most bearish list if the market rallied back to the top of the range. As you can see, there wasn’t a lot of improvement with the rally.

 

 

Support and resistance levels gleaned from the Twitter stream continue to show that the current range on SPX is the only thing that interests traders. They aren’t tweeting prices above or below the range in any volume. Current support levels for SPX are 2020 and 1975. Resistance is 2065, 2080, and 2100.

Sector sentiment is the one bright spot this week with the defensive sectors showing weakness and leading sectors showing strength.

 

 

Overall sentiment shows market participants are discouraged and waiting. 7 day momentum is tepid, breadth is waning, there are many loved stocks in the most bearish list, and traders are uncommitted as evidenced by the lack of price targets. We’re back to watching the range and how the indicators react on a break higher or a trip back down to the lows.