Since mid April we’ve seen a bit of bottom fishing among the 50 most active stocks on Twitter. We currently have four stocks with counter trend bounce signals in place. Each of those stocks have rallied to moving averages (50 and 200 day) and also down sloping trend lines. This is a point where people who are bearish on the stocks should be selling them short. This creates a battle between the longer term investors who are picking up the stocks as they fall and bears who sell every bounce off the underside of moving averages. By watching these battles we can learn about the underlying strength of the general market. If the current rally is near a turning point we would expect to see more short selling in the market. In addition, the stocks that are being sold should fall and continue their long term down trends. For a general view we like to compare a short of the S&P 500 Index (SH) against an actively managed bear fund
Over the past week our core market health indicators fell slightly, but we made no changes to our core portfolios. The details are in this post. We’re seeing a battle between event risk and market internals. Overall our measures of market health and internal structure are constructive, while our measures of risk are signalling skittishness by investors. The S&P 500 Index (SPX) held up fairly well last week in the face of several market scares. It seemed like every day brought some new rumor that drove the market up and down. But when the dust settled SPX only gave up a little over one percentage point. Meanwhile measures of intermediate term breadth like the percent of stocks above their 200 day moving average and the bullish percent index still have very healthy readings. Looking at market internals this appears to be a garden variety consolidation. We’re not seeing any real damage under the covers as price pulls back. SPX has held a critical support level near 1600 and bounced twice
On Twitter @DownsideHedge we tweet all the trade signals generated by our Twitter sentiment indicator for individual stocks. We tweet long signals, when a long position is closed, short signals, and when the short is closed. In addition, we also mention any consolidation warnings and when they’re cleared as well as counter trend bounce signals and their corresponding signal that the down trend is likely resuming. For official tracking purposes we use the closing price of the day we get a signal. However, in real life we don’t rigidly follow the signals. As we’ve mentioned many times before you must use your own judgement and not blindly follow the trade signals…ours or anyone else. Today we had an example of a signal that closed a long position on Citigroup (C). However, in real life we wouldn’t sell our stock simply based on the Twitter indicator. When we posted the signal we tweeted that we’d give the trade more room. Please note the market and Citigroup were pretty close to being
As intermediate to long term investors we often ignore the daily gyrations of the market. We don’t pay a lot of attention to what happens during the day because most of the time it just doesn’t matter. In fact, a lot of times we’re flat out bored and have difficulty finding things to talk about. Our days are usually filled with waiting for weeks on end for something that changes the underlying technical structure of the market enough to change our portfolio allocations. Those changes are usually in small increments so they’re boring events too. I’ll even make the confession that I don’t have CNBC or Fox Business on TV during the day. I have Fast Money in my DVR, but only because it runs an hour after the market closes so it covers earnings announcements. Long story even longer, most of the time what we see on a daily basis is irrelevant. However, once in a while we get near an inflection point where things can get exciting very
Below are charts of the bullish intensity scores for the most bullish stocks on Twitter for the week and month ending 6/11/13.
Below are charts with the bearish intensity scores for the most bearish stocks on Twitter for the week and month ending 6/11/13.
Below is the status of the most Active stocks on Twitter. Here’s a post that explains our Stock Status Categories. The next two charts show the intensity scores for the the most active stocks on Twitter for the week and month ending 6/11/2013.
Our core market health indicators didn’t change much this week so we made no changes to our core portfolios. Market Positives Our market risk indicator started showing concern during the selling on Thursday, but recovered substantially after the market bounced. This is the indicator we feel is most important to watch in the current environment. Higher concern about the Fed tapering QE or Japan’s woes will almost certainly show up in market risk before we see it in any of our other indicators. As we mentioned on Monday we felt like the S&P 500 Index (SPX) should catch at 1600 due to multiple forms of support converging. The two strong days that have followed indicate there were buyers waiting for that level which creates a good line in the sand. Our measures of market quality, trend, and strength are all positive. The selling last week didn’t do any substantial damage which indicates strength in the internal structure of the market. In addition, our market stability indicator held up fairly well
It’s the first Friday of the month so today we get a new list of stocks to hold in the Twitter Top 10 Portfolio. These stocks will be held from the close today (6/7/13) until the close on July 5th, 2013. BAC, GS, F, CSCO, C, KORS, CLSN, BIDU, HD, HOT Two stocks stayed in the portfolio this month. Ford (F) and Starwood Hotels (HOT). After the market closes (or over the weekend) I’ll update the performance chart and give details of performance for the stocks that were held last month. As of about 2:00 PM Eastern the portfolio is up 3.22% since 5/3/13 and 26.6% from the first Friday this year. Here’s a link to last week’s update that has the list of stocks we are holding until the close today. Update 6/8/13 – the portfolio gained 3.41% for the month as of the close on Friday. It is up 26.8% from the first Friday of the year. The gains for the month are mostly a result of Ford
On Monday we gave our thoughts on where the market would bounce. Today we got a price low near 1600 and also got the bounce we expected. The question now is, “Will the bounce hold?” Tomorrow brings the all important payroll report so it would be foolish for me to make predictions ahead of it. Especially since all I have to do is wait and I’ll know everything I need to know tomorrow. Regardless of my instincts to wait until after the payroll report I’m going to do what I always do and take the data I have available now to make my decisions…because I know that when tomorrow comes I’ll still be wanting for more information. In Monday’s post we mentioned that if/when the S&P 500 Index (SPX) fell to 1600 we would be watching to see how leading stocks react. We believe that leading stocks give good indications of the direction of the market so we look at them along with other technical indicators for guidance. For the