Yesterday was my dad’s 83rd birthday. For you hipsters who wear a cardigan and fedora you can thank my dad for the style. He has a closet full of hats and sweaters in various cuts and styles that he’s collected over the years. His 50 year crusade to bring the style back has finally succeeded. He wants to thank all of you for following his lead because he no longer has to go to specialty stores to get his hats. He tells me he found this one in the teenage girl section at Macy’s. Happy Birthday Dad!!! We love you.
Over the past week we saw more weakness in almost every indicator we track. Our core market health indicators deteriorated substantially. There are only a few positive things we can point to. The most important being price. This market just doesn’t want to be held down. Every piece of bad news is met with a sizable drop that is bought almost immediately. The other positive thing we’re seeing is our measures of risk aren’t warning even on days where the market is down substantially. Investors and traders just don’t seem to be afraid of this market. Our Twitter sentiment indicator for the S&P 500 Index (SPX) warned of consolidation again this week. We’re starting to see the same type of pattern that was painted during February just before the market fell for several days. Positive days in the market aren’t registering high readings in daily sentiment. This is a result of many traders wanting to short the all time highs on SPX near 1576 and investors stating that they believe
All of our core market health indicators fell again this week. The price action on Friday caused most of the damage. Our measures of the economy only weakened slightly, but they are still in the very weak range. Our measures of market quality, trend, and strength fell sharply. The good news is our measures of risk only declined slightly. People just aren’t afraid of this market. As a result, our portfolio allocations haven’t changed.
Every Tuesday I post a list of stocks with the highest bullish intensity in trader’s tweets. The list is comprised of stocks that a lot of people are excited about on Twitter so they have very high bullish sentiment scores. So what happens if you simply buy the most bullish stocks on Twitter? First of all, let me specify that I’m not recommending this as a strategy. This is just an illustration. Since the first of the year I’ve been tracking a mechanical investing strategy that buys the top ten bullish stocks over the past month. I’ll call it the “Twitter Top 10 Portfolio”. The list is created on the first Friday of every month and I use Friday’s closing prices for buying and selling. Now that I’ve got three months of history I thought you might like to see the results. First is a chart of performance comparing the Twitter Top 10 Portfolio against the S&P 500 Index. Below that I’ve listed the stocks it would have owned each
We’re seeing caution signs from several areas. The most important to us is that our core market health indicators continue to weaken. They track the economy and market internals that we categorize into quality, trend, strength, and risk. They have fallen enough to limit our exposure to the market in our Long / Cash portfolios and to moderately hedge in our hedged portfolio. The silver lining that has kept us out of an aggressive hedge is that price hasn’t confirmed the market internals and our measures of risk haven’t shown us that market participants are expecting a large move down in price. Today our Twitter sentiment indicator for the S&P 500 Index (SPX) again warned that the market may need some time to consolidate gains. After the last warning near the end of January the market rose for another few weeks gaining 30 points. It then had a small reversal giving back 45 points. Add one more thing giving us concern. Next is that several leading stocks on Twitter are
Below are the stocks with the highest bullish intensity (volume and scores) on Twitter for both the past week and past month.
Below are the stocks with the most bearish intensity (volume and scores) on Twitter for both the past week and past month.
Below are the stocks with the highest intensity (volume and scores) on Twitter for both the past week and past month.
In our weekend update for Twitter sentiment we mentioned that we were seeing a higher number of stocks warning that they might need to pause. Cisco Systems (CSCO) provides an example of a Twitter sentiment warning. From the first of the year through mid February smoothed sentiment for CSCO generally confirmed the upward movement in the stock. Then the stock dipped 5%. This dip caused smoothed sentiment to fall as well, however, the fall was not steep which served as confirmation that CSCO still had support for traders on Twitter. We often refer to that condition as a confirmed uptrend. When CSCO broke higher in early March we noticed a negative divergence in smoothed sentiment. Then in mid March sentiment fell below the confirming up trend line. It is the combination of a negative divergence and a break of a confirming trend line that signals a warning. This does not mean that CSCO is likely to change direction. It merely serves as notice that CSCO may need time to consolidate