Last week, sector sentiment from the Twitter stream gave a warning. It is showing an overbought condition where every sector has positive sentiment. When this has occurred in the past, it has almost always been followed by a short term top within a few days.
At Downside Hedge I highlighted another indicator that has a good track record of calling short term tops or consolidation periods. It is also warning.
Sentiment for the S&P 500 Index (SPX) is showing a bit of lag in the trend. As price is moving higher, sentiment is stalling.
On the bright side, the count of bullish stocks is rising at a steady pace. This indicates that the breakout to new highs is being met with widespread optimism.
Another sign of optimism comes from traders price target tweets for SPX. The Twitter stream is starting to see a lot of calls for 2400.
Conclusion
We’re likely due for a short term top. Sector sentiment is overbought and sentiment for SPX is stalling. Once a bit of consolidation occurs, it appears the market should move higher due to widespread buying and calls for higher prices.
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