Over the past week I saw improvement in almost all of the indicators I follow. However, the improvement was somewhat tepid. The indicators paint a picture of market participants willing to nibble and take small risks, but not expecting a lot of upside over the near term. Market breadth continues to improve on the headline numbers, but individual charts show a much more delicate picture. This isn’t a problem for now, but something to watch closely if the market pauses or dips. If a retracement back to the 1850 to 1800 level on the S&P 500 Index (SPX) brings with it a sharp decline in the percent of stocks above their 200 day moving average and the bullish percent index it will be a warning sign that the intermediate term trend is changing. A retracement without a sharp decline in breadth will indicate that the weak hands were shaken out during the dip in January and buyers are stepping up. Breadth is the indicator I’m watching most closely this coming
Below are charts with the bullish intensity scores for the most bullish stocks on Twitter for the week and month ended 3/4/14.
Below are charts with the bearish intensity scores for the most bearish stocks on Twitter for the week and month ended 3/4/14.
Below are charts with the intensity scores for the most active stocks on Twitter for the week and month ending 3/4/14.
Below are charts with the bullish intensity scores for the most bullish stocks on StockTwits for the week and month ended 3/4/14.
At the close on 3/4/14 a buy signal was generated for Bank of America (BAC). This signal comes from quantified StockTwits messages. As the stock has consolidated recently it has increased in support and sentiment from the StockTwits community. After a positive divergence over three weeks the trend of positive messages have overwhelmed the trend of negative messages which triggered the buy signal. Here’s a post with the details of how we trade stocks based on StockTwits and Twitter.
The S&P 500 Index (SPX) finally closed and held above 1850 a couple of times this past week. This is a positive development for the market if 1850 continues to hold. A break back below 1850 will indicate that the market needs more time to digest the 2013 gains. This coming week price is the indicator to watch most carefully. Although price has broken a major resistance level there are still several indicators giving mixed signals. Our market health indicators that monitor the economy and market strength are still negative, and our measures of market quality keep bouncing along just above zero. This isn’t the underlying environment I like to see when the market is breaking out to all time highs. This suggests a bit of caution is warranted over the next few weeks. Our investor contentment index continues to fall from fairly high levels while our market stability indicator is recovering from very low levels. This suggests investors are less comfortable the higher the market goes, but are losing
At the close on 2/27/14 a sell signal was generated for the Emerging Markets ETF EEM. This signal is a result of smoothed Twitter sentiment confirming the downtrend in EEM by painting lower highs (as price did the same), then breaking back below the uptrend line created by the positive divergence drawn from the last lows. Sentiment is breaking down as EEM is being rejected at its 50 day moving average. This suggests that short covering, buying, and positive statements about the security on Twitter are drying up and selling or negative tweets are increasing at a logical resistance area.
Over the past few weeks I’ve highlighted some things that suggest the market is in a trading range between 1800 and 1850 on the S&P 500 Index (SPX). Another thing I’m seeing that indicates uncertainty is the lack of trade signals generated from the Twitter stream. During the early months of 2013 as the market was coming out of a choppy period there were a lot of long signals generated (green vertical lines on the chart below). As the market started to turn over in May several short signals were generated (red lines). Throughout most of the year the pattern of buy signals as the market rallied out of lows and sell signals at the beginning of declines continued. The dip into early February this year has broken that pattern. There were a few sell signals as the market declined, but no buy signals on the subsequent rally. When I look at individual charts I see sentiment confirming the price decline as a stock consolidates. Bank of America (BAC) and