Courtesy of Doug Short.
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The Downside Hedge Twitter sentiment indicator for the S&P 500 Index (SPX) is showing a lot of indecision by market participants. Both the daily and smoothed indicator are being dragged around by price. The consolidation warning issued the previous week came as the market was making a bottom and is another indication of chasing by traders on Twitter. They aren’t committing themselves to positions or more likely are getting stopped out by the volatile intra-day swings.
Smoothed sentiment is still below its confirming down trend line after signaling a warning so the consolidation warning is still in effect. This indicator has been bouncing back and forth above the zero line for over a month and adds to the argument of uncertainty.
Price targets gleaned from the Twitter stream continue to paint a disconcerting pattern with very few tweets calling for prices above current market levels. This has been a theme since late December which illustrates the reluctance of market participants to deploy new money expecting higher prices. The result has been a very choppy market since the first of the year. Over the past few weeks this condition has been exacerbated by a rising number of tweets for prices well below current levels. This sets up a situation where traders believe there is large downside risk, but very little upside reward. This alone urges caution and suggests that the market will need a reason to move substantially higher. Currently, major support is at 1840 and 1800 on SPX. Below that 1770 and 1740 garner the most tweets. Resistance is at 1875 with nothing significant above that level since the first of the month when there were a few calls for 1900.
Sector sentiment continues to show some defensiveness with Consumer Staples and Utilities highly positive. Basic Materials, Energy, and Technology are the leading sectors with the highest sentiment.
Overall sentiment is showing uncertainty by market participants. The indicators are moved more by price than expectations and hard observations, traders aren’t calling for higher prices, and sector sentiment is positive for both leading and defensive stocks.
Blair Jensen at Downside Hedge tracks Twitter sentiment and provides hedging strategies for individual investors.
