When markets rally strongly almost everything goes up with them. That has certainly been the case with this current rally. Over 90% of stocks in the S&P 500 Index are above both their 50 and 200 day moving averages. So if you’ve been making long trades you probably feel like a genius. Of the stocks well follow and trade with Twitter sentiment almost every long trade with the trend over the last two months is in positive territory. This is what happens in fast moving up trends so we’re not patting ourselves on the back. We know that a pull back will happen eventually and the success of our trade signals will eventually be tested by lower prices. Today’s price action in the major indexes hints that we might finally be getting the price reversal that many bears have been waiting for. With that in mind we thought it would be a good time to show some of the long trades that we’ve mentioned on Twitter @DownsideHedge over the past
We first wrote about the canaries in the coal mine that were warning of a correction in February. As recent as last week the canaries were still warning. Not so any longer. The canaries lived. Most of the time when a market gets thin at new highs a correction follows, but once in a while the thin market resolves itself with rotation. That’s what we’re seeing now. The defensive sectors that have led all year are starting to under perform the broad market and the stocks that have lagged are being bought. Our Twitter support and resistance levels had pegged 1600 on the S&P 500 Index (SPX) as the most important resistance we’ve seen since we started tracking it. There were a huge number of tweets that targeted that level. The rotation in stocks since the break out above 1600 highlights how important that level was. People who were defensive are starting to trim those positions and others who were under invested are buying technology, financials, and industrials. Even the
Below are charts of the bullish intensity for the most bullish stocks on Twitter over the past week and month.
With earnings season upon us we thought it would be a good time to show some charts of Twitter sentiment for stocks that are reporting over the next couple of days. Please note that all of the charts are as of last Friday’s close. Our first chart is of Citigroup (C) which reported this morning. Before you say anything…yes we realize that this chart isn’t “Pre-Earnings”, but in fairness we did Tweet about Citigroup on April 8th. I don’t always post charts here on the site so you’ll want to follow us @DownsideHedge to get all the chart updates. Citigroup signaled that its consolidation was likely over at the close on April 5th by painting a positive divergence in smoothed sentiment that ultimately broke its down trend line. Smoothed sentiment is currently confirming the up trend which tells us that people were accumulating the stock before the earnings release this morning. It won’t signal a consolidation warning until smoothed sentiment paints a negative divergence with price and then breaks the
Above are the stocks with the highest intensity scores on Twitter over the last week. Below are the monthly numbers.
The stocks in the chart above have the highest total Twitter Intensity scores. Below are the Monthly scores.
Over the past few weeks Twitter sentiment for bank stocks has continued to weaken. Morgan Stanley (MS) has now joined Goldman Sachs (GS) in the warning category. It has broken the confirming uptrend line and also broken below zero. As we noted in our weekend update for the S&P 500 Index (SPX) this condition isn’t serious when it signals against the trend. As with most other technical indicators, signals against the prevailing trend generally only cause a pause in price movement. In an uptrend they provide an opportunity to buy the dip rather than signaling that the stock is going to start a new down trend. Smoothed Twitter sentiment for Citigroup (C) and JPMorgan Chase (JPM) are both starting to paint negative divergences with price. This comes after painting sentiment readings that mirrored price. Traders sold into weakness (sentiment mirroring price), but aren’t buying the new found strength (sentiment diverging negatively). These two stocks may join GS and MS in some profit taking. Watch the bank stocks over the
We wanted to highlight a few Twitter sentiment charts today that are looking interesting. Please note, we don’t recommend that you base your trading decisions solely on this one indicator. It should be used as just one more piece of the puzzle when making decisions. The first one is Google (GOOG). We showed this chart last Friday when GOOG gave its first warning that traders were taking profit and losing optimism as price pushed higher. After diverging from price, smoothed sentiment broke the confirming uptrend line. Since Friday’s warning the stock has spiked higher and taken smoothed sentiment back to the down trend line that has been in place since early February. Over the next few days GOOG will either clear the warning or turn back down. The island on price is a very concerning pattern. We don’t want to see a gap down tomorrow or it could cause trouble for the stock. Remember that many people who own GOOG also own…or have owned…Apple (AAPL) during its downtrend. These traders