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Market Health Falls Perceptions of Risk Fall

Over the past week most of our measures of market health fell. Measures of trend rose and perceptions of risk abated a bit.  The market is trying to bounce, but isn’t showing the type of strength usually associated with a short term low.  While underlying internals are deteriorating, price for the S&P 500 Index (SPX) is painting a pattern that often marks the halfway point in a short term decline.  The pattern is still short in duration and will require a break below 1770 on SPX to increase the probability of a continued decline.  A few closes above about the 1820 level would negate the pattern and suggest the market will rally higher. Our measures of the economy, market quality, and strength all fell sharply.  Our measures of strength fell far enough that we’re raising some cash in the long/cash portfolios and adding a larger hedge to the hedged portfolio.  The long/cash portfolios are now 60% long and 40% cash.  The hedged portfolio is now 80% long stocks that we

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Large Losses in Twitter Top 10 Portfolio

The Twitter Top 10 portfolio has several stocks suffering large losses this month resulting in an overall loss of 5.5% from the first Friday of the year. The S&P 500 Index (SPX) is only down 2.55% over the same time period.  Eight stocks are down on the month and only one stock, SolarCity (SCTY) up 26%, has notable gains. The losses come from several sectors and provide a bit of warning that the current decline in the market may not be over just yet. Widespread selling near market highs is often a sign of a rotation to safety.  Keep an eye on the most loved stocks for some clues on where the market will head next.  A strong rebound in the current portfolio holdings would be a very good sign for the market as a whole because it would signal that the dip is being bought. Continued deterioration will most likely accelerate the current decline. Below is a performance chart and details of the current holdings. Start Date Symbol Shares Start

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StockTwits Top 10 Portfolio has Widespread Losses

The StockTwits Top 10 portfolio is down 3.65% from the first Friday of the year. It is lagging the S&P 500 Index (SPX) which is down 2.55% from the same date. The losers in the portfolio are widespread with six stocks showing losses more than 10%. Two stocks are keeping the portfolio competitive with SPX. They are Solar City (SCTY) up 27% and Yelp (YELP) up 13.7%.  It is encouraging that the portfolio isn’t lagging too badly considering the carnage in stocks that span several sectors. Below is a performance chart and details of all of the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 1/3/2014 $SCTY 168 59.27 9957.36 75.44 12673.92 27.28% $BAC 620 16.41 10174.20 16.83 10434.60 2.56% $YHOO 249 40.12 9989.88 35.9 8939.10 -10.52% $BIDU 57 175.28 9990.96 156.77 8935.89 -10.56% $GRPN 828 12.08 10002.24 10.58 8760.24 -12.42% $MA 120 83.03 9963.72 70.07 8408.40 -15.61% $WLT 626 15.98 10003.48 11.57 7242.82 -27.60% $CELG 58 169.81 9848.98 151.73

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Breadth from the Twitter Stream

Stock Market Breadth from the Twitter Stream

I’ve created a new breadth indicator that uses our sentiment indicator scores along with the most bullish and most bearish lists as its basis.  I wasn’t happy with the way I was calculating breadth before because the method was too subjective. The new algorithm is completely automatic and scores the stocks in the most bullish list against the stocks in the most bearish list (then does a bit of math to put it on a scale from -100 to 100).  Basically the indicator gives a measure of how many stocks have support on the Twitter stream against the number of stocks that are showing weakness on Twitter.  When the indicator is above zero there are more bullish stocks than bearish.  Of course, below zero means more bearish stocks than bullish. At first glance, here are a few things I noticed when comparing breadth to the S&P 500 Index (SPX).  First, all of 2013 did not see a reading below zero.  Which is what should be expected in a year that

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End of Buy Signal for MasterCard

The buy signal issued for MasterCard (MA) on 9/5/13 has been closed. This has been a great trade that is up over 25% from by signal to close signal. Like the post on Baidu (BIDU) yesterday this is a trade that you could let ride a bit longer and set a stop below yesterday’s low.  Or close the trade if the S&P 500 index stalls at its 50 day moving average and MA remains weak.  The market is poised for at least an oversold bounce so MA should rise with it at least for a day or two.  As always you should manage your own trades because a trade signal isn’t the same as trading in real life.

 
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Sell Signal for Bonds

At the close today sentiment from the Twitter stream issued a sell signal for bonds (TLT). Smoothed sentiment has been painting a negative divergence from price as the ETF rallied into its 200 day moving average.  This suggests that traders are selling this rally and don’t have confidence TLT can move higher.  Sentiment broke below its confirming uptrend line which triggered the sell signal.  One thing to note is that the down trend line from smoothed sentiment is at high levels so I wouldn’t wait for sentiment to break back above it to close this trade.  Instead a trader should set their own stops and actively manage the trade.

 
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Most Bullish Stocks on Twitter

Below are charts with the bullish intensity scores for the most bullish stocks on Twitter for the week and month ended 1/28/14.

 
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Most Bearish Stocks on Twitter

Below are charts with the bearish intensity scores for the most bearish stocks on Twitter for the week and month ended 1/28/14.

 
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Most Active Stocks on Twitter

Below are charts with the intensity scores for the most active stocks on Twitter for the week and month ended 1/28/14.

 
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Most Bullish Stocks on StockTwits

Below are charts with the bullish intensity scores for the most bullish stocks on StockTwits for the week and month ended 1/28/14. One thing of note this week is that only 16 stocks met the weekly criteria and only 24 met the monthly criteria. Usually there are far more than 25. Some damage is being done to the most active stocks on StockTwits.

 
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