Below are the stocks with the highest intensity (volume and scores) on Twitter for both the past week and past month.
For the past few months Twitter sentiment for the ETFs that track the Nasdaq 100 Index (QQQ) and the Russell 2000 Index (IWM) have been painting a pattern that shows indecision by traders. Each move up in price is met with high sentiment and each move down garners a lot of negative tweets. This is causing our smoothed Twitter sentiment indicator to mirror price. When sentiment mirrors price it shows us that traders are chasing. Their tweets are reacting to price rather than predicting it. Smoothed sentiment for QQQ and IWM are currently showing very wide swings from bullish to bearish. This uncertainty is not a normal condition for actively traded and tweeted stocks. Instead, as momentum builds for a stock, Twitter sentiment starts to trend with the stock in a well defined range. Traders show confidence in their positions with a majority of tweets confirming the trend. In up trends, down days don’t show large negative prints in daily sentiment which helps smoothed sentiment continue to rise (and confirm
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.
Before we get to the sentiment charts I wanted to make a note that it’s likely we’ll be making some changes in our portfolios tomorrow. However, at this point we don’t know if it will be raising more cash and adding hedges or if we’ll be adding more long exposure. Several of our core market health indicators are so close to a trigger point that any substantial move on Friday will drag them in the direction of the move. Our indicators aren’t often in a position where they’re this uncertain. I had to go back to January of 2007 and April of 2006 to find similar examples. Both of those times had us adding exposure on the long side for just a few more weeks then the market corrected abruptly. One other example was during the choppy market of 2004. This isn’t a prediction of the same pattern ahead, just an observation that uncertainty in our indicators usually translates to sloppy market performance. We’ll make a note on Twitter @DownsideHedge
I wanted to do just a quick update today on the fight between the bulls and the bears on Twitter that we mentioned over the weekend. Twitter Sentiment for the S&P 500 Index (SPX) on a daily basis took a dip below zero again today even as the market moved substantially higher. It was still close to zero at -5, but not normal on a good rally day. This caused smoothed sentiment to break its confirming trend line. We take this as our first warning that the current rally may stall. It does not mean that a correction has begun, but it does tell us that traders and investors don’t like the break above 1500 and many of them are selling into it. This should at least cause some headwinds. Our next warning of a more serious correction would occur if smoothed sentiment drops below zero as that would signal that the negative sentiment and selling has occurred over several days. In the past this has often been enough to
We’ve been following the Apple (AAPL) saga with our Twitter Sentiment Indicator since AAPL’s bad earnings report in July. In mid August while AAPL was trading near 640 we posted that based on sentiment AAPL would “break out to the upside”. Sentiment proved correct as AAPL continued to rally up to 705 in mid September then started to paint a negative divergence with price. That negative divergence brought about a 10% correction that we believed was merely a profit taking event due to the lack of a serious break down in sentiment. However, we warned that we wouldn’t try to catch a falling knife and that we’d “wait for a price reversal that shows extremely positive sentiment”. We never got that condition. Instead, AAPL continued to fall and broke below its 200 day moving average in early November. In that post we mentioned that since AAPL had broken the 580 Twitter Support level that “the first most likely target range is near 520 with 500 just below that”. Those
Today we want to highlight three charts that give a pretty good picture of the current conditions in the market. They are for the Nasdaq 100 (QQQ), The Russell 2000 (IWM), and Long Term Bonds (TLT). Since the first of December, Twitter Sentiment for QQQ has been painting a triangle pattern. During the same time period price is forming a megaphone. These two conditions together show some indecision for the Nasdaq 100 Index. We’re seeing slowing momentum in sentiment that could be pointing to a head and shoulders pattern forming (with the trend line we’ve drawn as the neckline). It’s still to early to tell which direction QQQ is going to break, but sentiment should give us a clue over the next few weeks as it reaches the apex of its triangle. IWM has a much stronger price pattern with sentiment confirming its current move. However, there is a short term divergence with price that suggests IWM needs to pause for a bit before going substantially higher. Small stocks aren’t