The current consolidation in the market is causing more stocks to warn or show negative chart and sentiment patterns. In addition, more are showing up with sentiment readings that don’t give a clear indication of the stock’s current status. However, we still have 62% of the 50 most active stocks with positive chart and sentiment readings. The stocks that show negative patterns are roughly the same number as what we saw during the first of May during the first part of the current consolidation. This is somewhat encouraging for the bulls since the market is quite a bit lower, but chart patterns aren’t breaking down and sentiment isn’t showing a build in extreme bearishness either. Below is a chart of the status of the 50 most active stocks. In addition, there are charts showing the intensity scores for the most active stocks for the week and month ending 6/25/13.
Below are charts with the status of the 50 Most active stocks on Twitter and the intensity scores for the 25 most active stocks on a weekly and monthly basis.
We’re finally starting to see some hopeful signs for gold (GLD) and gold stocks (GDX). In our last update we mentioned that the chasing of precious metals by traders had stopped and that we’d finally got some capitulation in sentiment (calculated from the Twitter stream). This was the first thing we were looking for in order to create an environment where gold could create a durable low. Now we have our second piece of good news. Twitter sentiment for GDX is signaling that it is ready to attempt a counter trend bounce. This signal is created by the positive divergence between smoothed sentiment and price which subsequently broke above the prevailing down trend in sentiment (green line on the chart below). Volume on the recent low compared to the April low is also suggesting that GDX is trying to bottom. The high volume sell off in April forced weak holders of GDX to capitulate. In addition, it caused fear even among long term holders. This relieves some of the overhead
We haven’t done an update on gold and gold stocks since the end of February. The reason for this is that their charts have been broken. As technicians we look at price, volume, trend, strength, sentiment etc. to help us determine the likely path of a security. But, when price breaks down hard it skews the chart pattern so badly that the most important component for technical analysis (price) becomes of little value (other than the obvious message that the stock is broken). As a result, all we can do is wait for enough time to pass for the stock to reassert a readable pattern. Finally we’re starting to see a trickle of information from precious metals charts. In early February when GLD was trading above 160 and bouncing against the underside of its short term down trend line we gave up almost all bullish hope for the metal. By the 13th of February we stated that if GLD traded back down to 150 that “GDX will almost certainly break
Below are charts showing the bearish intensity for the most bearish stocks on Twitter over the past week and month.
Below are charts of the most bearish stocks on Twitter for the past week and the past month. The weekly list is littered with precious metals stocks…which was to be expected. Notice the the energy ETF (XLE) is also in the weekly list. Back in 2008 energy and precious metals led the stock market downward. Is this a repeat?
Below are the charts of the most active stocks on Twitter over the past week and month. Notice that GLD beat Apple (AAPL) this week. This is the first time we’ve seen any stock out pace AAPL. However, we’ve seen activity for AAPL trend lower over the past few months.