With earnings season upon us we thought it would be a good time to show some charts of Twitter sentiment for stocks that are reporting over the next couple of days. Please note that all of the charts are as of last Friday’s close. Our first chart is of Citigroup (C) which reported this morning. Before you say anything…yes we realize that this chart isn’t “Pre-Earnings”, but in fairness we did Tweet about Citigroup on April 8th. I don’t always post charts here on the site so you’ll want to follow us @DownsideHedge to get all the chart updates. Citigroup signaled that its consolidation was likely over at the close on April 5th by painting a positive divergence in smoothed sentiment that ultimately broke its down trend line. Smoothed sentiment is currently confirming the up trend which tells us that people were accumulating the stock before the earnings release this morning. It won’t signal a consolidation warning until smoothed sentiment paints a negative divergence with price and then breaks the
Since the first of April it appears that traders are simply chasing price. When smoothed Twitter sentiment paints a similar pattern to price it shows that traders are reacting to price rather than relying on other technical indicators to make trades. Another sign of traders chasing is very wide swings in daily sentiment that follow price. This is somewhat expected when price breaks important support and resistance levels, but isn’t common when price is between major support and resistance points. The break above 1575 on the S&P 500 Index (SPX) painted a positive initiation thrust in daily sentiment. The fall back below 1575 this morning brought a negative initiation thrust. This action in sentiment could simply reflect the move back through that level, but it since it’s occurring with smoothed sentiment mirroring price there is also the possibility it may signal chasing. When traders chase price it causes volatile swings and creates instability. This is a time to be cautious. Twitter sentiment for SPX cleared it’s consolidation warning last week
This past week the market proved itself once again by refusing to let bad news stick. Our core market health indicators were mixed, but generally improved. This leaves our portfolio allocations the same. Market Positives Once again the most positive thing in the market is price. Every one percent dip seems to be met with buyers. Bad news continues to be seen as a buying opportunity and market participants don’t believe there is substantial risk to the downside. Ironically, the the technical indicator that is working best is price. Since the November low a 3.5% trailing stop would have been the only thing you would have needed to stay on the right side of the market. Our measures of market risk have been a good guide as well, but we never feel comfortable relying solely on measures of risk. This is because risk almost always enters the market suddenly and often doesn’t warn until price has already fallen. It is for this reason that we rely on a variety of
It doesn’t pay to be smarter than the market. Our core market health indicators mostly improved this past week, however everything but risk remains deep in negative territory. Our measures of the economy continue to slip lower as economic reports from around the world bring disappointment. Our measures of trend slipped as well, however this is mostly due to the market stalling over the past month so we expect improvement if the S&P 500 Index (SPX) can stay above 1550 and ultimately break above 1600. Our measures of risk, quality, and strength all improved as the market showed resilience in the face of bad news. That’s probably the most important observation we make this week. There is virtually no perceived risk. I use the word “perceived” because we see plenty of risk. But if there is one thing I’ve learned over my life is that it doesn’t pay to be smarter than the market. As a result, our hedged portfolio remains modestly long and won’t be aggressively hedged unless
Our Twitter Top 10 portfolio has gained 2.9% this week. The S&P 500 Index (SPX) is up 2.1%. Once again the most bullish stocks on Twitter are outperforming the general market. The biggest gainers are Ford (F) , Green Mountain Coffee Roasters (GMCR), and Micron Technologies (MU). All of them are up close to 8% on the week. Yahoo (YHOO) and Starwood Hotels & Resorts (HOT) are up nearly 6%. The stocks with losses since April 5th are Best Buy (BBY) down 5.23% and VMware (VMW) down .79%. A performance chart and details are below. Here’s a post with some background on how the portfolio is created. Please note: Prices are from mid day on Friday 4/12/2013. I’ll use closing prices on the first Friday of every month for “official” tracking purposes. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 4/5/2013 $BBY 610 25.45 15524.50 24.12 14713.20 -5.23% $YHOO 482 23.3 11230.60 24.61 11862.02 5.62% $HOT 173 60.14 10404.22 63.8
Today the S&P 500 Index (SPX) broke to new all time highs and added over 19 points. It did so with a positive initiation thrust from daily Twitter sentiment. The intensity of tweets was very high as well. This is evidence that traders and investors on Twitter were hailing the move. Unlike other sentiment indicators, extreme bullish readings at new highs on Twitter sentiment confirm the move higher and signal that the market is likely to continue upwards. Basically, today showed that people were excited about the new highs, rather than accumulating a lot of shorts at this level. In fact, yesterday and today we saw a lot of short covering instead. The bears are throwing in the towel for the moment. Now we have to see what the bulls have in their tank. Do they still have enough gas to push the market higher? The way we’ll know is if we get some follow through. To remain positive about this market moving higher I’d like to see SPX stay
Below are charts of the stocks with the highest bullish intensity on Twitter over the last week and month.
Every weekend we do a post about the current state of the market and often recap many of the indicators we follow to gauge market health. We break them down into categories of Positive, Mixed, and Negative for the market. Over the past few months we’ve been seeing more and more troubling signs. Our Canaries in a Coal Mine post from six weeks ago looks largely the same, except the put/call ratio which is falling. We still have warnings from our core market health indicators and Twitter sentiment. And there are still a lot of macro and technical reasons why this market should fall. So you might be asking yourself why the market isn’t correcting. The answer is simple. Price matters. Every star in the universe could align to predict a market melt down, but it still wouldn’t matter until price confirms the prediction. That’s the condition we currently have in the market. All the reasons listed above serve as warning, but don’t mean anything until price confirms the warning.