Just a quick update today on our Twitter Sentiment indicator for the S&P 500 Index (SPX). Yesterday it posted the highest reading it has ever recorded at +35. Today is only a bit lower than that. The last time we had a print that was even close was just before the October highs. However, back in October our smoothed sentiment indicator was painting negative divergence with price. Today, smoothed sentiment is confirming the rally so the trend is clearly up. For signs that the market is due for a pull back we’ll be looking for a divergence on daily sentiment or a break of the trend line on smoothed sentiment.
As we’ve stated in previous posts, the decline from September to November this year did a lot of internal damage to the markets. We’ve started seeing some of that damage undone in the percent of stocks above their 200 day moving average and also the bullish percent index. Basically we’re in wait and see mode where it’s time for the market internals to either put up or shut up. We’re neutral on the market with our core market health indicators showing a slight negative bias, but price moving higher which could give us a modestly positive outlook on further strength (ex risk due to our market risk indicator). One thing we’re looking at for confirmation of the recent rally is the new highs on the New York Stock Exchange (NYA). As NYA came out of the November lows there were encouraging signs as the number of new highs rose with price. They were behaving as we would expect until the last part of November. Over the past two and a
My youngest got home from Berkeley yesterday for Christmas break. By planning ahead he saved himself the trouble of packing. Two weeks ago he started wearing the clothes he would need for the holidays then used his duffel bag as a laundry bag. His college education is finally starting to pay off. Maybe he can become an efficiency expert when he graduates.
Most of our core market health indicators traded sideways last week leaving us aggressively hedged in our Long/Short portfolio, 100% cash in our Long/Cash portfolio, and 40% long / 60% cash in our Core Long/Cash portfolio. Market Positives The Russell 2000 index (RUT) once again held above its 50 day moving average. The S&P 500 index is hovering on its 50 dma, while Nasdaq is trading just below its own. The percent of stocks above their 200 dma is above the level attained the last time SPX traded near 1435 and has cleared the levels that often signal trouble. Our Twitter Sentiment indicator for the S&P 500 index (SPX) continues to confirm the rally out of the November lows. Tuesday’s break above 1425 brought with it a lot of tweets from traders going long with the belief that the market should go higher. However, Thursday and Friday’s readings are giving us our first warning that prices may consolidate further as the daily indicator has broken its recent uptrend line. It
My wife was doing some Christmas shopping online last night and got the results in the screenshot below. If you haven’t picked up the problem, the total should be $37.25. Instead of going to another site to make the purchase, she took the time to call their customer support line and have the five bucks credited back to her. I would have run from the site and avoided it in the future. She has a lot more experience in shopping than I do so all I can figure is she’s right and I’m wrong. What would you have done? Another interesting thing she ran into last night was when she tried to buy a gift card online. The website had the card on the site, but when she tried to add it to her cart she got a message stating that item must be purchased in a brick and mortar store. She was shocked…and so was I. How much money are retailers losing because they have a poor online
Over the weekend we noticed that our Twitter sentiment indicator for Baidu (BIDU) painted an initiation thrust. I had planned to do a post and totally forgot…too excited to write about AAPL…sorry. Here’s a belated post that we hope will be helpful in understanding what we look for (even if it may be too late for a trade). Last Friday (12/7) BIDU had an initiation thrust where price confirmed the reversal that occurred two days earlier and our Twitter sentiment indicator printed an extremely high reading. What we we look for is a price reversal that is confirmed in an extreme way by the tweets of market participants. When this happens it signals that traders believe that a stock has bottomed, they are buyers, or the recent lows are support or a good pivot point. Basically it reflects short term sentiment changing from bearish to bullish. It usually signals at least two days of buying will follow. On a longer term basis we’re seeing a positive divergence between our smoothed
Over the past four months volatility (VIX) has been in an uptrend. During October and November VIX spiked above 19 and has been slow in its descent back to the bottom of the up trend channel it is painting. This shows that investors are concerned about the immediate future of the stock market. We’re watching the bottom of the up trend channel and also the down trend line we’ve drawn from the late May peak to the early November peak for confirmation of the next direction for VIX (and the market). In addition, we’re keeping an eye on our Twitter Sentiment indicator for VIX. From the low made in early October our daily Twitter sentiment indicator confirmed the move in volatility. However, during the move into the November peak in VIX our smoothed sentiment indicator showed a fairly strong negative divergence. This resulted in VIX falling over the next month. It traded back to near the bottom of the down trend channel and then bounced. We’re now starting to see
Over the past several years Apple (AAPL) has been a driving force in the market. Traders have watched AAPL on a daily basis to decide the direction and timing of trades in other stocks. They have used AAPL as a leading proxy for the market. Is this about to change? Over the past few days it appears that AAPL has disconnected from the market and traders are seeing it as a single story stock. AAPL is breaking down, but the major indexes, including Nasdaq are holding up relatively well. Can the two disconnect? Let’s compare Twitter Sentiment charts for the Nasdaq 100 (QQQ) and AAPL to see if it provides any clues. If you look at the chart below you can see that QQQ painted an initiation thrust in our daily Twitter sentiment indicator last week. It printed a very low reading on a day where price reversed. This is similar to the initiation thrust painted in late September as the market was making a sharp move down from 52
I trust the numbers. If you listen to them, they’ll give you a good sense of direction that you can’t get anywhere else. Robert L. Duncan China Dawn
Last week our measures of the economy deteriorated enough to join our measures of market quality and trend in negative territory. This moves our Core Long / Cash portfolios to 60% cash and 40% longs. Our other portfolios have been aggressively hedged or 100% in cash since October 19th due to the negative reading in our Market Risk Indicator. Market Positives The S&P 500 Index (SPX) closed above its 50 day moving average (although just barely), while the Russell 2000 Index (RUT) has managed to trade above its 50 day moving average for over a week. These are positive signs that are encouraging. We’d like to see Nasdaq move higher and join the other two indexes for confidence that the bulls have regained control. Our Twitter Sentiment indicator for the S&P 500 Index (SPX) is confirming the current uptrend. Both daily and smoothed sentiment are showing very strong readings that reflect the optimism of market participant’s tweets. We saw a good number of tweets early last week predicting the market