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Home Social Media Stock Market Indicators Archive for category "Twitter Support and Resistance"
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More of the Same

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This week we saw more of the same. Our core indicators strengthened while ancillary indicators weakened. The only core indicator that got worse was our measures of risk. Early in the week they were showing more concern from market participants even as the market moved higher. Thursday did some serious damage to them and Friday only saw a partial recovery. So far they’re providing early warning, but no signals. It will most likely take another few weeks to shake out. One thing I follow that suffered a lot of damage this week is the relationship between high quality bonds (LQD) and junk bonds (JNK). While LQD appears to be painting a bullish flag, JNK is falling sharply. This suggests that bond owners are shifting money from risk (JNK) to safety (LQD). The events in Ukraine and Gaza on Thursday had LQD rising while JNK fell. Watch this relationship going forward because a shift in bonds often occurs before a flight to safety in stocks. Speaking of stocks, the symbols I

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Tale of Two Markets

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Last week’s market action didn’t affect our core health indicators too much, but many of the ancillary indicators I watch suffered some damage. While the market looks healthy on the surface there are enough indicators warning to suggest the worst isn’t behind us yet. Currently we have a tale of two markets. Although our core health indicators are positive most of them have weak enough readings that they could turn negative over the next few weeks. However, this would be very unusual given the fact that many of them turned positive just last week. Generally, when all of them move above zero they stay there for at least two months. Weakness in these indicators will provide significant warning. Another indicator that is telling two stories is our core measure of risk. It is still showing low perceptions of risk, but just came out of an overbought condition. This often marks the beginning of corrections larger than 10%. Momentum stocks are also acting indecisive. Many of them have had good runs over

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Twitter Sentiment Diverging

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Just a quick update this weekend. As the market pushes higher sentiment from the Twitter stream continues to diverge. We’ve got a good upward sloping confirming trend line in smoothed sentiment that if broken will warn of possible consolidation ahead. But as long as smoothed sentiment stays inside the triangle currently being painted or breaks above it odds favor higher prices. Support and resistance didn’t change as traders have gone pretty quiet this summer. Support is at 1925 on the S&P 500 Index (SPX). Resistance is at 2000, but almost no one is talking about that level any more. Sector sentiment is finally showing some weakness in Consumer Staples which suggests some of the rotation to safety is over. This is another positive for the market. Overall, it’s the same story I’ve been telling for weeks so we can expect more marginal new highs followed by a period of chop.

 
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Lack of Belief

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Over the past week the market rallied, but our core market health indicators didn’t participate. In fact, all of them except for our measures of risk turned down. As a result, we’re still 30% short in our hedged portfolio and only 40% long in the Long/Cash portfolios. One thing of note this week is that our market risk indicator is diverging from our core measures of risk. Our core measures of risk have made it into over bought territory while our market risk indicator is well below that level. Historically, over bought readings have usually been followed by a dip of more than 10% within a month or two. Early 1999 and 2013 were exceptions. There were four over bought readings in 2013 and three in 1999 that did not result in a good dip. Between 2000 and 2012 there were three times our core measures of risk were over bought. They were January 2004, April 2010, January through April 2011. I’m not too concerned about this indicator at the

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More Chop

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Our Twitter Sentiment Indicator for the S&P 500 Index (SPX) is once again suggesting that more chop is in the near term future. Last week the daily indicator fell with the market, but had mostly positive readings. This indicates that market participants aren’t too concerned about the current weakness. Friday brought about more concern with a reading of -15 as traders tweeted about the situation in Iraq, oil prices, and extremely high bullish sentiment from various sources (AAII and CNN’s Fear & Greed Index). Smoothed sentiment continues to decline as the excitement resulting from a break above the 1900 level on SPX has started to fade. It continues to paint a negative divergence with price which suggests there may be more weakness ahead. The weakness should be contained if the indicator stays above zero and its confirming uptrend line. Support and resistance levels generated from the Twitter stream continue to paint the same pattern from the first of the year where traders are reluctant to target higher prices. It has

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Back to Normal

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In early May I mentioned that the  conditions of our indicators gave a 60% chance that the sideways consolidation in the S&P 500 Index (SPX) was “normal rotation and profit taking that will result in higher prices when it’s done”. They also gave a 40% chance that an intermediate term top was in the works. In that post I also mentioned that various measures of breadth and risk “will need to break down if the market is going to correct”. These measures held up and SPX moved on to new highs. It looks like the odds played out correctly this time and market internals are getting back to normal…although reluctantly. One thing many bears have been mentioning is the number of new highs on NYSE being very low during May even though SPX was within a few percentage points of all time highs. That condition resolved itself this week. The one sign of breadth that has shown the most weakness over the past month is the ratio between SPX equal weight

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Reluctant Gains

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Over the past week our Twitter Sentiment Indicator for the S&P 500 Index (SPX) rose sharply. The rise was a result of bears giving up once SPX had a strong close above 1900. In fact the move in price caused the intensity of bearish tweets to drop by half. The bullish tweets didn’t increase much which signals that the bears aren’t turning bullish, merely stepping aside. Until the bears turn bullish the market won’t have the fuel to push prices significantly higher. Support and resistance levels are slowly moving up with the market. However, the break above 1900 on SPX still isn’t bringing with it substantially higher price projections from traders on Twitter. Most of the bullish tweets are clustered between 1925 and 1930, with some fun being had by bears stating the highs of the year will be 1929. There are also a few scattered tweets near the 2000 level. Below the market 1910 is the only significant support. This is further evidence that the bears have stepped aside

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Time For A Direction

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Over the next couple of weeks the market will be forced to choose a direction. The S&P 500 Index (SPX) is being squeezed between its 50 day moving average near 1860 and its last peak near 1900.  Each day that goes by the 50 dma will move higher and put more pressure on the index. The pressure will force SPX to either move higher or fail at its 50 dma so we should get a direction over the next few weeks. Coincidentally, support and resistance levels gleaned from the Twitter stream are compressing in  the same range. There are a few scattered tweets down near 1850, but the majority are near 1860.  Above the market the most tweeted level is near 1900. This tight range suggests that traders are watching closely for a break before committing themselves. Quantified messages from the StockTwits community issued a consolidation warning for SPX Friday at the close. Please note, this isn’t a prediction that the market will move lower, merely warning that sentiment and

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Chasing and Whipsaws

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Over the past week we got more of the same from the indicators I follow.  The market chopped around and our indicators had a slight decline.  Market participant appear to be chasing price and being whipsawed by choppiness.  This action is showing up in market internals.  An example  is the ratio between near term volatility (VIX) and mid term volatility (VXV).  On a daily chart it moved above 1.0 signalling caution right at the low of the last dip.  Then when it moved back below .9 (usually signalling “all clear”) the market lost momentum and looks to be rolling over again. The weekly chart of VIX vs. VXV shows two caution signals (above 1.0) since the first of the year that occurred on small dips in price. In addition, both VIX and VXV are making lows above all of the 2013 lows.  This indicates not only increased caution by market participants, but a bit of skittishness.  It is reacting much the same as measures of breadth that I’ve mentioned since

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Chasing and Uncertainty Continue

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Over the past week the market had a good rebound. Many of the indicators I follow moved up, but didn’t recover as fast as the market. It appears as if market participants are being whipped around without much conviction. Not a lot has changed from last week. New highs are still painting a down trend, the bullish percent index is at about the same level, and our market risk indicator improved slightly. The notable changes come from the percent of stocks above their 200 day moving average and the ratio between one month volatility (VIX) and three month volatility (VXV). The percent of stocks above their 200 day moving average recovered back above 80%, however as I’ve mentioned before the headline number isn’t telling the whole story.  Over the past three weeks the market dipped less than 4%, but dragged 15% of the stocks in the S&P 500 Index (SPX) below their 200 dma.  A 2% rise repaired two thirds of the damage. This tells us that a large number

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