We’re seeing the first cracks in Twitter sentiment for the S&P 500 Index (SPX). Today smoothed sentiment broke below its up trend line. This is after painting a negative divergence with price during the recent high. It is still above zero so the market has some room to consolidate without doing serious damage to sentiment, but this is a time to be on the look out for a rally that doesn’t bring with it confirmation by Twitter sentiment.
The highs in September and October had some of the same characteristics, however, they took sentiment below zero. If we get a large negative print in daily sentiment tomorrow (Friday) it will be enough to push smoothed sentiment to a point that signals traders have switched from bullish to bearish.
1400 on SPX still has very strong support with the majority of tweets picking it as a line in the sand. Just below near 1390, the 200 day moving average, is another cluster of support but it is much smaller. We are starting to believe that 1400 must hold or we’re going sharply lower. This is a time to be very careful with your investments. Wait for a clear direction before allocating much money.