The counter trend bounce signal for Coca-Cola (KO) that was issued on 10/11/13 has been closed on 10/25/13. Sentiment generated from quantified tweets has broken its up trend line and suggests that the stock should continue its downtrend in price. There is some hope for the stock in that it has broken above the intermediate term down trend line, its 50 day moving average, and its 200 dma. A small consolidation at this level and a move higher is needed to make the chart more constructive. Of course, I’d like to see sentiment confirm the move too.
Over the past week the breadth of the 50 most active stocks on Twitter rose. However, as I mentioned over the weekend, I’m seeing a split between weak stocks and strong stocks. A few more stocks moved into confirmed up trends while a few stocks moved back to confirmed down trends. The other categories has some minor shuffling. Another sign of a market that is starting to split between weak and strong is the action in stocks that have been in multi-month consolidations. Some of them seem to be breaking down and painting lower lows, while others are painting higher lows and nearing a point where they could break higher. Coca-Cola (KO) and IBM are examples of stocks that are continuing their down trends and making lower lows. EBAY and Disney (DIS) are examples of stocks that have been consolidating for several months, are now making higher lows, and are very close to breaking out of the consolidation and moving to new highs. Below are charts with the current breadth
Coca-Cola (KO) generated a counter trend bounce signal at the close on Friday (10/11/13). Quantified tweets (aka sentiment) have been painting a positive divergence with price for over two months and has broken above a confirming down trend line almost four weeks long. This suggests that people have been buying this last dip while the stock was down between 10% and 13% from the may peak. This is one of the stocks I’ve been watching that have been consolidating for several months. If it can break higher it will be one clue that the market will rally into the end of the year. Be aware that the company reports earnings on Tuesday.
I’ve often talked about looking at your own portfolio to get a feel for the underlying market. Over the weekend I noticed a pattern repeating in a wide variety of the stocks I actively track that can provide an indication of where the market is likely to go next. There are several stocks across almost every sector that are currently painting multi-month consolidation patterns. Many of these patterns consist of fairly wide and loose sideways or down patterns where the difference between peaks and valleys are in the 10% or more range. These wide consolidations show the growing uncertainty among investors as they have been reluctant to push a broad cross section of stocks to higher prices. At the same time many of the stocks aren’t being pushed substantially lower. At this point the stocks are still mostly consolidating, but their performance over the next month or so will likely show the market’s hand. If they start to break higher the market will go with them. If they break down
We’re starting to see a lot of stocks that with downside surprises showing up in the most bearish stocks on Twitter list. Tesla (TSLA), Coca Cola (KO), and Research in Motion are some examples (BBRY). We’re used to seeing a lot of stocks in a down trend like VMware (VMW). The market doesn’t like surprises. If this trend continues it could change overall sentiment. Below are charts with the bearish intensity scores of the most bearish stocks on Twitter for the week and month ending 7/16/13.
Tesla Motors (TSLA) did what no other stock has been able to accomplish. Over the past week it had a higher volume and intensity of tweets than Apple (AAPL). From the time we’ve been tracking Twitter sentiment AAPL has always been the most active stock on Twitter (on a weekly and monthly basis) so this is quite an accomplishment…even if TSLA only beat AAPL by a few points. Below are charts with the intensity scores of the most active stocks on Twitter for the week and month ending 7/16/13. Here is a chart with the status of the 50 most active stocks.
The Twitter Top 10 portfolio bounced back this week. It is now up 4.1% for the month and 27.7% for the year. The gains are a result of two big winners. 3D Systems (DDD) is up over 22% and Ford (F) is up over 15%. The losers in the portfolio are exactly what our concerns were when the list was created at the first of May. We made explicit mention about LinkedIn (LNKD) which is down 2.74%, Johnson & Johnson (JNJ) down .36%, and Coca-Cola (KO) down 4.38%. If we were using our heads instead of a mechanical system we would have avoided these picks. By skipping defensive sectors like Consumer Staples, Utilities, etc. that we felt were being sold by most market participants we would have bought the following stocks instead. Home Depot (HD) up 7.4%, Advanced Micro Devices (AMD) up 12.2%, and Walt Disney (DIS) down .002%. That’s why we feel you should think for yourself rather than blindly following any investment strategy. Below is a performance chart
We haven’t commented much on the general market and market internals lately due to the completely boring nature of this latest rally. When a rally is being fueled by everyone believing it will go up due to outside forces (central banks printing money and buying debt) nothing else matters. As a result, we haven’t been able to pinpoint anything interesting that would give you (or us) any insight into what the market is doing. Well we’re finally seeing some interesting action under the covers. The S&P 500 Index (SPX) has given back just 3% from intra-day peak to trough and barely over 1% on closing prices. Not very exciting, but everyone is suddenly asking if this is finally the top we’ve all been waiting for. For some insight we like to look at individual charts and see if everything is being affected or if the selling is localized. Broad based selling is bad. Localized selling is good…if it results in rotation…which is what we believe is causing the current sloppiness
Our Twitter Top 10 portfolio gave a little back this past week. It is now up 3.15% for the month and 26.5% on the year. Below are a performance chart and details of this month’s holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 5/3/2013 $LNKD 71 175.59 12466.89 173.8 12339.80 -1.02% $DDD 315 39.88 12562.20 46.4 14616.00 16.35% $F 903 13.83 12488.49 14.79 13355.37 6.94% $UPS 130 86.09 11191.70 86.83 11287.90 0.86% $HOT 173 65.21 11281.33 68.45 11841.85 4.97% $JNJ 146 85.75 12519.50 86.82 12675.72 1.25% $SBUX 203 61.87 12559.61 63.36 12862.08 2.41% $COH 216 58.25 12582.00 57.76 12476.16 -0.84% $KO 298 42.24 12587.52 42.24 12587.52 0.00% $V 68 179.54 12208.72 180.45 12270.60 0.51% Cash 229.54 229.54 Totals 122677.50 126542.5 3.15%