Once again, sentiment for the stock market (SPX) generated from the Twitter stream is holding the uptrend line that was first established in February of this year. Although the market is bouncing around quite a bit in the few hours after the fed statement, the general consensus in Tweets is that the market is going to move higher and that SPX will probably break 1700 within the next week or so. HT…Helene Meisler @hmeisler who took a survey with her followers today. If a move above 1700 occurs I suspect that we’ll see a lot of chasing and short covering. Due to the strong readings we got in sentiment starting near the first of July there is a good chance that any rally will bring with it a negative divergence (from smoothed sentiment). That will be our first warning that the market might be ready for a pause. But as of now market participants are resigning themselves to higher prices so the rally will most likely continue.
This week Facebook (FB) jumped to the top of the most bullish stocks on Twitter. Technology however, seems to be the major theme with VMware (VMW), Qualcomm (QCOM), Dell (DELL), F5 Networks (FFIV), Juniper Networks (JNPR), and EMC (EMC) making the list. Notice that many of the technology stocks have been in down trends recently but are showing upside strength. Below are charts with the bullish intensity scores for the most bullish stocks on Twitter for the week and month ending 7/30/13.
Bad news out of Potash (POT) increased both the volume and bearish intensity of tweets for the agriculture stocks this week. Mosaic (MOS) fell victim as well. This came as a big surprise to many, but taking a look at an agriculture ETF (MOO) you can see that agriculture has been in trending lower from early in the year. Also of note is that Caterpillar (CAT) leads the list this week, and emerging markets (EEM) and Dow Chemical (DOW) made the cut. This is starting to paint a picture of even more weakness in the most basic sectors of the world economy. Take a look at some charts of the other stocks on the most bearish list and you’ll see it littered with bad surprises. This may be early warning that the slow world economy is finally having an impact on the United States. Below are charts with the bearish intensity scores for the most bearish stocks on Twitter for the week and month ending 7/30/13.
Apple (AAPL) continues to top the most active list. Facebook (FB) is getting a boost this week as it’s almost back to its IPO price. Below are charts of the intensity scores for the most active stocks on Twitter for the week and month ending 7/30/13.
Although I don’t see very many near term concerns in the market, we are seeing some cautiousness by longer term investors. One of the things I like to watch is a comparison between a S&P 500 short (SH), an actively managed bear fund (HDGE), and mid term volatility (VXZ). As the market started to decline at the first of May we saw a slight rise in HDGE which signaled that people were starting to short the market, but were being cautious in pressing them. At the same time VXZ started to rise much more rapidly, which indicated that investors who hedge their portfolios with futures or options further out on the curve were adding protection. VXZ rising shows investors placing bets that the market will become volatile sometime over the next four to seven months. The taper talk by Bernanke caused another surge higher in VXZ as people started targeting September to December as the beginning of the end of QE. Once other Fed officials started making dovish comments much
Over the past week most of our core market health indicators fell, but none of them deteriorated enough to change our core portfolio allocations. Market Positives All of the major market indexes continue to trade near all time highs, with Nasdaq and the Russell 2000 trading well above their recent break out levels. This is occurring with measures of breadth such as the percent of stocks above their 50 and 200 day moving averages, and the bullish percent index confirming the new highs. In addition, our market stability index is back above zero, indicating that market participants are not concerned about near term shocks. Our measures of market quality, strength, trend, and risk are all positive, however, market quality is getting close to slipping into negative territory. We’ll need to see some strength in the market next week to avoid a warning sign. Our Twitter sentiment indicator for the S&P 500 Index (SPX) painted a negative initiation thrust on Thursday last week. This generally means that a few more days
Over the past week our core market health indicators were mixed. On the positive side our measures of the economy ticked up slightly, while our measures of trend held steady. During the same time period our measures of market quality and strength continue to slip lower, while perceptions of risk rose slightly. None of them changed enough to cause changes in our core portfolio allocations. Currently perception of risk is not a problem and will most likely take an event to affect our portfolios. However, the weakness we’re seeing in market quality will most likely have us raising cash or adding hedges next week if the trend doesn’t reverse. As a result, we’ll be evaluating our portfolio positions to decide where to trim if we get a signal. Below is a chart of the current conditions.
The Twitter Top 10 portfolio fell slightly this week, down .22%. On the year it is still up 20%. The under performance this month is due to chip stocks losing momentum. Micron Technology (MU) is down 12.23% and Advanced Micro Devices (AMD) is down 8.48%. The rest of the portfolio is performing fairly close to the market this month. However, we’re starting to see some of the high flying stocks of this year lose momentum. Something to keep an eye on for clues to the broader market. Below is a performance chart and details for the stocks held in the portfolio this month. Note prices were from about 8:15 AM pacific on 7/26/13. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 7/5/2013 $F 903 16.7 15080.10 17 15351.00 1.80% $NOK 2865 4.08 11689.20 3.995 11445.68 -2.08% $BBY 393 29.73 11683.89 29.38 11546.34 -1.18% $MU 816 14.31 11676.96 12.56 10248.96 -12.23% $SBUX 172 67.72 11647.84 72.86 12531.92 7.59% $AMD 2872 4.07 11689.04 3.725
The wife got all our kids together for a summer vacation over the last week. We went to Yosemite. These photos don’t do it justice. It is one of the places you have to visit to understand the magnitude of the place. “Majestic” was the word that came to mind when we first drove into the park. BTW, I should be home for the rest of the summer so posts to Downside Hedge should be back to normal next week.
Below are charts with the bullish intensity scores for the most bullish stocks on Twitter. Week and month ending 7/23/13.