Below are charts with the intensity scores for the most active stocks on Twitter for the week and month ending 11/12/13.
Breadth for the 50 most active stocks on Twitter held steady last week, however, there is still a negative divergence with price. Below are charts with the breadth and current status of the 50 most active stocks.
At the close on Friday a consolidation warning for the S&P 500 Index (SPX) was issued from quantified StockTwits messages (sentiment). A consolidation warning occurs when then trend of quantified messages is broken to the downside after diverging from price for more than three weeks. The rally out of the October low was met with decreasing sentiment on almost every push higher. One thing to note is that the current drop in sentiment is due to an increase in bearish messages, while the bullish messages stayed the same. This suggests that the bulls are still committed, but the bears see current prices as a good place to short. Please note, a consolidation warning is not a sell signal. It is simply a recognition that bearish sentiment is overwhelming bullish sentiment at the moment and that the market may need to consolidate before moving higher. The Twitter stream is filled with Tweets mentioning 1740 on SPX as strong support and 1775 as strong resistance. This gives us some good levels to
The consolidation warning issued for Yahoo (YHOO) on 10/29/13 has now been closed. The closure comes with very high sentiment readings as the stock is bouncing off its 50 day moving average. Although sentiment isn’t painting a positive divergence with price, the 50 day moving average has been a good place all year to add to YHOO. An aggressive trader could take the break of the downtrend in sentiment as a buy signal. As always, compute your own risk/reward and stops.
Over the past week the most telling signals came from sentiment and our risk indicators. As the market traded sideways negative sentiment continued to build, but at the same time our risk indicators are showing a total lack of fear. This is the same pattern as we saw from February through April this year where the market continued to move higher, but in a choppy fashion. Thursday and Friday painted back to back +1% days in opposite directions which is a sign of indecision by market participants. If the trend continues into next week it will provide warning of instability. Mid week our core market health indicators all showed a lot of weakness, however Friday corrected the damage indicating that buyers moved in force on the dip. As a result, we didn’t make any changes to our core portfolios. Our Twitter Sentiment indicator for the S&P 500 Index (SPX) issued a consolidation warning at the close on Thursday. Smoothed sentiment had been diverging from price since mid October and weakened
Our core market health indicators bounced around a bit this week, but none of them changed enough to modify our current portfolio allocations. Earlier in the week our measures of trend fell below the zero line, but recovered this morning. As you know we require a weekly close to change our portfolio allocations so this is a good example of patience helping us avoid a whipsaw. As a side note, we’re getting a consolidation warning from our sentiment indicator created from quantified tweets for the S&P 500 Index (SPX). Our sentiment indicator provides short term signals that we use for making small adjustments to our portfolios like trimming a hedge after the market has fallen and sentiment is indicating a short term rally. We use our core market health indicators to guide longer term adjustments. Both sets of indicators taken together suggest the market is attempting to make a longer term top, but momentum continues to push it higher. As always, we’ll wait patiently for a signal before moving any
The Twitter Top 10 portfolio is up just over 1% from last Friday while the S&P 500 Index is basically flat. The out performance comes mostly from 3D Systems (DDD) up 11.71% and Walter Energy (WLT) up 7.95%. The largest drag on the portfolio is Gilead Sciences (GILD) which is down 5.59%. Below is a performance chart and details of the current picks. Please note prices are from about 10:00 AM Pacific on 11/8/13. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 11/1/2013 $F 721 16.89 12177.69 16.78 12098.38 -0.65% $DDD 193 63.01 12160.93 70.39 13585.27 11.71% $ZNGA 3405 3.58 12189.90 3.5 11917.50 -2.23% $JNJ 130 93.37 12138.10 93.57 12164.10 0.21% $GE 459 26.54 12181.86 26.86 12328.74 1.21% $FSLR 293 59.14 17328.02 60.38 17691.34 2.10% $GILD 171 70.97 12135.87 67 11457.00 -5.59% $WLT 707 17.24 12188.68 18.61 13157.27 7.95% $GLW 711 17.13 12179.43 16.5 11731.50 -3.68% $MA 16 737.48 11799.68 730.45 11687.20 -0.95% Cash 519.41 519.41 Totals 126999.57 128337.71 1.05%
The buy signal issued on 10/25/13 for Bank of America ended today (11/7/13) at the close. As I mentioned on Monday, the bank stocks just couldn’t seem to get any momentum.
Twitter sentiment for the S&P 500 Index (SPX) has broken its prevailing uptrend line and also moved below zero. This occurred after sentiment painted a negative divergence with price for three weeks. This increases the odds that the market is poised to move lower. The warning comes a few weeks after sentiment for small cap stocks (IWM) broke its prevailing trend. Nasdaq 100 (QQQ) also warned just over a week ago. However, sentiment bounced just enough to clear the warning before turning lower again. I suspect QQQ will warn again in the next few days. Quantified messages from the StockTwits for SPX stream is also on the verge of warning. It looks like the dominoes are falling. The message is that the odd favor some consolidation in the market before it can move higher.
Just a quick note today. I’m seeing some weakness in the internals that we follow as a part of our market health indicators. Our measures of trend are warning at the moment. The current rally isn’t getting the support it should to remain healthy. If this persists into Friday then we’ll be raising cash in our Long/Cash portfolios and adding more hedges to the hedged portfolio. It’s time to start reviewing positions to decide what to trim if we get a signal at week’s end. To change the current outlook it would most likely take a very strong rally on both Thursday and Friday.