Below are charts for the bullish intensity scores for the most bullish stocks on Twitter over the past week and month.
Our Twitter sentiment indicator for the S&P 500 Index (SPX) cleared its consolidation warning today at the close. The pattern being painted by smoothed sentiment looks like chasing by market participants as it is simply following price and throwing whip saw signals. This is further confirmed by daily sentiment printing very high and very low readings when price reaches highs and lows respectively. What we’ve seen lately is traders piling on just as the move is ready to fail (another sign of chasing). We’d rather see high daily prints at the beginning of an upward move or low daily prints near highs as this would show enthusiasm or anticipation near turns. At the same time price is painting a megaphone (broadening top) pattern which is another sign that market participants are uncertain in their actions. The chasing is occurring with fewer stocks fueling rallies. The percentage of stocks in the S&P 500 Index above their 50 day moving average have been diverging since February. The bullish percent
Over the past week our core market health indicators improved slightly, but didn’t move enough to change our portfolio allocations. Market Positives Once again the market ignored bad news. It won’t matter until it matters… What else can we say? Our measures of risk are still positive, but didn’t recover with the move up in the S&P 500 Index (SPX) last week. Market participants are starting to recognize that a small dip could turn into something larger. Nevertheless, risk levels are positive which gives the market room to rise. Mixed Signals The Nasdaq 100 Index (NDX) finally recovered with SPX, however it is still below the peak made last September so we consider it mixed. The Russell 2000 Index (RUT) regained its 50 day moving average, but has a very short term series of lower highs and lower lows. These conditions need to clear before we’ll believe higher prices in the broader market. Measures of breadth like the percent of stocks above their 50 and 200 day moving averages continue
Over the past week we saw a good move up in the S&P 500 Index (SPX), however, our core market health indicators didn’t show a lot of strength. They all moved up, but without conviction. Market internals continue to diverge from price which suggests further consolidation. Our measures of risk which fell sharply in our last update didn’t recover much this past week. They are all still positive, but at fairly low levels. This signals that market participants are finally starting to recognize the potential of a larger decline in the market. Our measures of the economy and market quality recovered slightly. Our measures of trend and strength rose from deep oversold levels, but not nearly as much as we would like given the strong price action. We suspect that a move well above 1600 in SPX will be necessary to move these indicators into positive territory. It is disconcerting to us that the market is so close to all time highs and our indicators are so far below zero.
The Twitter Top 10 portfolio moved up 1.68% over the past week. It is still outpacing the S&P 500 Index (SPX) from the first of the year. The returns have been dampened this month by two big losers. Best Buy (BBY) is down 7.7% and VMware (VMW) is down 7.1%. Strong performance from Ford (F) which is up 9.9% and moderate performance from Yahoo (YHOO), Nike (NKE), and Green Mountain Coffee Roasters (GMCR) which are up between 4% and 6% account for the majority of the portfolio’s gains. A performance chart and details are below. Prices as of the close on 4/26/12. 4/5/2013 $BBY 610 25.45 15524.50 23.5 14335.00 -7.66% $YHOO 482 23.3 11230.60 24.68 11895.76 5.92% $HOT 173 60.14 10404.22 62.09 10741.57 3.24% $NKE 190 58.97 11204.30 61.89 11759.10 4.95% $V 68 165.16 11230.88 167.23 11371.64 1.25% $F 903 12.44 11233.32 13.67 12344.01 9.89% $GMCR 214 53.23 11391.22 55.56 11889.84 4.38% $VMW 146 76.91 11228.86 71.46 10433.16 -7.09% $UPS 130 83.54 10860.20 85.71 11142.30 2.60% $MU 1207 9.31 11237.17
We’ve often stated that the best use of our Twitter sentiment indicator is to confirm the trend and warn of a pause (or consolidation) in the trend. It is not like other sentiment indicators who’s major use is to act as a contrary indicator. However, we’re starting to see a pattern in the sentiment of some of the most loved stocks that is somewhat contrary in nature. The pattern occurs in stocks that have too much love. These are stocks that every trader, investor, and fund has to own. These stocks have so much love and such a cult following that positive emotions rule the sentiment. We’ll start with a chart of Baidu (BIDU). Take a look at smoothed sentiment from early June 2012 until early November. Notice how it had a hard time of ever getting below zero even though the stock was clearly in a down trend and had been for over a year. Traders loved this stock. They saw every dip as a buying opportunity. Even the