Waiting Without Hope

Market participants on the Twitter stream are getting cautious while they wait for a break of the range in the S&P 500 Index (SPX) between 2040 and 2140. 7 day momentum and sentiment from Twitter for SPX now has two lows that are the most oversold readings in almost three years. The rally this past week had little impact on sentiment indicating that investors are losing hope. In a healthy market a rally that brings price within 2% of all time highs brings with it strong sentiment readings. We’re less than 2% from all time highs and momentum from Twitter can’t even get above the zero line.

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Price targets from traders on Twitter for SPX have dried up. Our computer system that gathers tweets mentioning price is seeing tweets come after a price has been reached. Traders are sitting on their hands and observing rather than actively trading with an expectation of either higher or lower prices. It appears that they are waiting for a break of the current range between 2040 and 2140.

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Sector sentiment shows investors getting cautious with the defensive sectors showing the highest readings.

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In fact, Consumer staples (XLP) are trying to break higher ahead of SPX. It appears as there is a flight to safety underway.

 

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Breadth calculated between the most bullish and bearish stocks on Twitter is turning up mostly due to the number bullish stocks rising. However, the number of bearish stocks isn’t falling very fast. This indicates that beaten down stocks aren’t being bought with enthusiasm.

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Conclusion

It appears that market participants are waiting for a break of the range between 2040 and 2140 on SPX without much hope. 7 day momentum won’t turn positive, price targets are lagging price, and defensive stocks show the most support. Added all together we should expect continued chop rather that substantially higher prices.

 

Disclosure: None.

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Comments

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Carol Wydra 3 years ago Contributor's comment

how many people are in your control group on Twitter? I suspect not enough for an accurate gauge of sentiment..a gauge with some pretty glaring flaws even at its best. Sentiment? People say one thing behave in a completely different direction. They cave to peer wisdom and wanting to be 'in the know". My opinion anyway. Show me their trades. Their account activity. That's real.

Blair Jensen 3 years ago Author's comment

Carol, we track and score every tweet for over 650 symbols on Twitter. Any person who tweets is included in our "control group". However, we throw out spammers. We have several hundred thousand people that tweet about stocks and have caught almost 50k spammers.

The term sentiment only roughly applies in this case. Our system looks for actions (buying, selling, hedging, etc.), events, fundamental analysis, technical analysis, and last of all opinions. Tweets with more justification for an opinion are scored higher. So in the end the indicator shows the direction of the crowd. We use the trend of Twitter momentum to make trades. You can see more info here: www.tradefollowers.com/.../...sis_from_twitter.jsp