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Home Social Media Stock Market Indicators Archive for category "Twitter Support and Resistance"
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Make or Break Time

By almost all the measures I track it’s make or break time for the market.  I’m seeing a pattern in both core and ancillary indicators that has often marked lows in the market over the past few years.  Each time our indicators were close to signalling an extreme warning the market promptly turned back up and resumed the rally out of the 2009 lows. Over the longer term when our indicators have reached these levels the market rallied 35% of the time and had an extended decline or choppy period 65% of the time.  As you know, I can’t see the future so all we do is go with the odds.  As a result, our core portfolios raised cash and/or added a hedge yesterday.  Here are some highlights of things I’m seeing that makes me cautious. The ratio between near term volatility (VIX) and 3-Month volatility (VXV) is currently rising as a result of both VIX and VXV moving up.  This is a condition that has only occurred a few

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Twitter Sentiment Compressing

Over the past week our Twitter Sentiment indicator for the S&P 500 Index (SPX) moved dramatically on a daily basis, but the smoothed indicator is being compressed as the market moves sideways to up.  When the market moved to all time highs the daily indicator confirmed the move with prints in the +25 area, but that was quickly reversed as price consolidated on Thursday then fell on Friday.  This suggests that traders are being whipped around by price and are a bit jittery. Smoothed sentiment has held its confirming uptrend line for nearly two months, but is also being held in check by a three month down trend line that has a negative divergence with price. This compression indicates that the battle between the bulls and the bears is becoming more evenly matched as time moves forward. It also suggests some indecision which will need time to resolve. Support and resistance levels also show indecision by traders on the Twitter stream.  Last week when SPX moved above 1885 only a

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Rotation Without Fear

Over the past week the rotation out of the most loved and momentum stocks into value stocks continued. The rotation is causing internal damage to our core indicators, but our measures of risk aren’t showing any fear.  This paints a picture of market participants simply taking profit on the stocks in their portfolios that had the largest gains over the past year.  Any fear appears to be limited to the high flying stocks, not the market as a whole…yet.  I’m seeing a lot of warning signs which suggest caution, but not aggressive action. The percent of stocks in the S&P 500 Index above their 200 day moving average has recovered from its early February dip and is holding steady near the 80% level.  However, a look at individual charts shows many stocks painting bearish flag patterns just above their 200 day moving average.  General Electric (GE) is a good example. The number of new highs on NYSE diverging from the market shows that a significant number of individual stocks (like

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Lack of Enthusiasm

Over the past week the market rallied and almost all of the indicators I follow rallied with it.  However, the underlying indicators were sluggish.  They aren’t reacting the way I’d expect when the market is attempting to make new all time highs.  Looking across the board I’m seeing a lack of enthusiasm from market participants and internal indicators alike. Our core market health indicators still have three categories (of five) with negative readings. Measures of breadth like the the percent of stocks above their 200 day moving average or the bullish percent index are still diverging from price. Many individual price charts are painting bearish flags rather than recovering recent losses.  Our investor contentment index is barely above zero and our market stability index has been below zero since the first of the year.  Added all together these indicators are suggesting a sluggish market is ahead of us unless we get a catalyst to point a direction. Our Twitter Sentiment indicator for the S&P 500 Index (SPX) is painting a

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Tops Are a Process

Over the past several weeks the StockTwits community, the Twitter stream, and market internals have been sending signs of weakness that suggest the market may be in the process of topping.  As you know, I don’t like to make predictions about the future. Instead I make portfolio adjustments based on the current condition of market internals and other technical indicators expecting favorable odds over the long term.  Here are some things I’ve noticed over the past three weeks that have indicated caution is warranted. On February 26th I posted a chart showing a lack of trade signals coming from the Twitter stream as the market was moving strongly out of a short term bottom.  That was unusual behavior and suggested that traders weren’t supporting the most active stocks on Twitter. On the next day I posted a chart to Twitter and StockTwits that indicated volatility (VIX) should move higher based on quantified messages from StockTwits.  After several weeks of confirming lower volatility the StockTwits community broke the trend with new

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Willing to Nibble

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

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It’s All About 1850 on the S&P 500 Index

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

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In a Trading Range

As many of you know, my goal at Downside Hedge is to provide information and ideas that you won’t find in other places.  This week I suspect will be one of those times where I share a theme that many (most) will disagree with.  I believe we’re in a trading range.  I could be wrong, but for now I think the most important information we’re getting from the market is the range between 1800 and 1850 on the S&P 500 Index (SPX). First let’s look at the evidence that makes my point of view look foolish (then I’ll give my justification).  SPX has just put in a very steep V bottom.  That chart pattern almost always resolves with the market going on to new highs. The Nasdaq 100 (NDX) is leading the market and has already printed new highs.  The NYSE cumulative Advance/Decline (NYAD) line turned up sharply over the past few weeks and is confirming the move higher.  The percent of stocks above their 200 day moving average has

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Consolidation Warning for the S&P 500 Index

At the close on Friday our Twitter Sentiment Indicator for the S&P 500 Index (SPX) issued a consolidation warning.  This warning comes as a result of a negative divergence in smoothed sentiment that began at the first of the year and continued until 1/22/13, which was followed by a break below the confirming uptrend line being painted by smoothed sentiment. During the first three weeks of the year the market traded sideways, but sentiment painted lower highs as market participants slowly lost faith that the market could rally above the 1850 level on SPX.  The break below 1770 brought with it a fairly negative reading on the daily indicator of -18.  The subsequent rally back to the 1800 area is being met with skepticism by traders on Twitter.  Friday’s strong rally didn’t convince the majority of people tweeting and resulted in a -8 print on the daily indicator. This warning comes after the market has been very oversold and has now bounced.  This is the first time the indicator has

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Battle Raging

Last week I characterized the market as “a battle joined, not won. The bears have reasserted themselves, the skittish bulls have run from the field, but there is a shield wall of committed bulls still standing firm.  This puts us in a position where the best we can do is wait to see the outcome of the battle.” This week the indicators show the battle raging with both bulls and bears suffering casualties.  The bulls are still standing firm, but have not been able to advance.  The inability to push the market higher is starting to paint a bearish flag that often results in a break lower.  Meanwhile, every attempt by the bears to push prices lower was met with buying. Underlying evidence of the raging battle comes from our Investor Contentment index that rose again last week while our Market Stability indicator continued to decline. Those two indicators are showing extreme readings.  Market Stability has oversold prints that are more often associated with market lows after a correction of

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