The Twitter Top 10 portfolio bounced back this week. It is now up 4.1% for the month and 27.7% for the year. The gains are a result of two big winners. 3D Systems (DDD) is up over 22% and Ford (F) is up over 15%. The losers in the portfolio are exactly what our concerns were when the list was created at the first of May. We made explicit mention about LinkedIn (LNKD) which is down 2.74%, Johnson & Johnson (JNJ) down .36%, and Coca-Cola (KO) down 4.38%. If we were using our heads instead of a mechanical system we would have avoided these picks. By skipping defensive sectors like Consumer Staples, Utilities, etc. that we felt were being sold by most market participants we would have bought the following stocks instead. Home Depot (HD) up 7.4%, Advanced Micro Devices (AMD) up 12.2%, and Walt Disney (DIS) down .002%. That’s why we feel you should think for yourself rather than blindly following any investment strategy. Below is a performance chart
Over the past week most of our core market health indicators improved. Our measures of the economy are still negative, but improving slowly. Our measures of risk showed some weakness that signals investors are getting a bit more concerned about the market. However, we believe that this is a normal condition when the market stalls rather than an indication of substantially lower prices. Our measures of market quality, trend, and strength jumped substantially this week. It is interesting that our measures of trend followed quality and strength in going positive especially since the rally out of the November lows has trended so strongly. It is an indication of how odd this rally has been from a underlying technical perspective. The positive changes in market trend is causing a change in our core portfolio allocations. Our Long / Cash strategies are now 80% long and 20% cash. Our Hedged portfolio is now 90% long and 10% short (using a simple short of the S&P 500 Index — or the ETF
We haven’t commented much on the general market and market internals lately due to the completely boring nature of this latest rally. When a rally is being fueled by everyone believing it will go up due to outside forces (central banks printing money and buying debt) nothing else matters. As a result, we haven’t been able to pinpoint anything interesting that would give you (or us) any insight into what the market is doing. Well we’re finally seeing some interesting action under the covers. The S&P 500 Index (SPX) has given back just 3% from intra-day peak to trough and barely over 1% on closing prices. Not very exciting, but everyone is suddenly asking if this is finally the top we’ve all been waiting for. For some insight we like to look at individual charts and see if everything is being affected or if the selling is localized. Broad based selling is bad. Localized selling is good…if it results in rotation…which is what we believe is causing the current sloppiness
We’re finally starting to see some hopeful signs for gold (GLD) and gold stocks (GDX). In our last update we mentioned that the chasing of precious metals by traders had stopped and that we’d finally got some capitulation in sentiment (calculated from the Twitter stream). This was the first thing we were looking for in order to create an environment where gold could create a durable low. Now we have our second piece of good news. Twitter sentiment for GDX is signaling that it is ready to attempt a counter trend bounce. This signal is created by the positive divergence between smoothed sentiment and price which subsequently broke above the prevailing down trend in sentiment (green line on the chart below). Volume on the recent low compared to the April low is also suggesting that GDX is trying to bottom. The high volume sell off in April forced weak holders of GDX to capitulate. In addition, it caused fear even among long term holders. This relieves some of the overhead
Below are charts of the intensity scores for the most bullish stocks on Twitter over the past week and month.
Below are charts of the intensity scores for the most bearish stocks on Twitter over the last week and month.
Below are charts of the intensity scores for the most active stocks on Twitter over the past week and month. Here is the status of the fifty most active stocks on Twitter. We’re starting to see more consolidation warnings and more unclear charts.
Just a quick update on our Twitter sentiment indicators for the S&P 500 Index (SPX) and sectors today since we didn’t do an update over the weekend. It appears to us that SPX is trying to decide what to do. Sentiment is showing a negative divergence from price, but it hasn’t met our three week to a month criteria that we use to provide meaningful signals. Over the next week we should have enough information to make a call (either a consolidation warning or confirmation of the uptrend). Support and resistance numbers generated from the Twitter stream stayed the same last week even with the big moves in price. Support remains 1650 and 1600 and resistance is at 1665 and 1700. We did get some tweets in the 1635 area pointing to the lows on Thursday and Friday. We’ll need to see them continue into this week to consider them support if 1650 fails. From a sector perspective the market looks like it wants to go higher. Consumer Staples and
Our Twitter Top 10 portfolio gave a little back this past week. It is now up 3.15% for the month and 26.5% on the year. Below are a performance chart and details of this month’s holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 5/3/2013 $LNKD 71 175.59 12466.89 173.8 12339.80 -1.02% $DDD 315 39.88 12562.20 46.4 14616.00 16.35% $F 903 13.83 12488.49 14.79 13355.37 6.94% $UPS 130 86.09 11191.70 86.83 11287.90 0.86% $HOT 173 65.21 11281.33 68.45 11841.85 4.97% $JNJ 146 85.75 12519.50 86.82 12675.72 1.25% $SBUX 203 61.87 12559.61 63.36 12862.08 2.41% $COH 216 58.25 12582.00 57.76 12476.16 -0.84% $KO 298 42.24 12587.52 42.24 12587.52 0.00% $V 68 179.54 12208.72 180.45 12270.60 0.51% Cash 229.54 229.54 Totals 122677.50 126542.5 3.15%
Our core market health indicators saw improvement in everything except our measures of the economy. We’re increasing exposure in our core portfolios today. Our Long / Cash portfolios will now be 60% long. Our hedged portfolio will be 80% long and 20% short. The short is a simple short of the S&P 500 Index (or SH). Below are charts showing where we added exposure (green lines) and raised cash or added hedges (yellow and red lines). The core long / cash portfolio has had limited exposure that has varied from 20% long to 100% long. The hedged portfolio (Long / Short Hedge) Has had a bit more exposure to the long side, but carried a fairly significant hedge during the last part of this rally. This was due to our core market health indicators remaining mostly negative during the move from 1550 to 1650.