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Friday, March 29, 2024

Gauging Investor Sentiment with Twitter: Weekly Update

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


The Downside Hedge Twitter sentiment indicator for the S&P 500 Index (SPX) is still on a consolidation warning. Thursday’s events in Ukraine and Gaza shook the confidence of market participants on Twitter. The daily indicator printed a -20. Friday’s recovery of price didn’t bring with it a strong recovery from sentiment. It printed a -13 that day. Smoothed sentiment turned back down this week and is still below zero and back at the low that created the consolidation warning.

This week was a good example of how events can impact investor sentiment. When an event occurs that shakes confidence in the market it often takes several days to repair. My observation has been that fear comes into the market quickly, but leaves it slowly. This puts bulls in a position that they need good news next week because bad news will add injury to an already fragile mood.

Support and resistance levels gleaned from the Twitter stream showed some optimism with new calls for 2000 on the S&P 500 Index (SPX). What has previously been a level with scattered calls is now looking more solid. This condition often acts as a magnet that the market is pulled toward. That level then acts as short term resistance. Support on Twitter has moved up to the 1945 to 1955 area.

Sector sentiment is also showing some positive action with the leading sectors showing the strongest support from the Twitter stream and the defensive sectors showing the weakest.

Overall sentiment is showing the same thing as our other indicators where half seem to be strong and the other half showing weakness. Both daily and smoothed sentiment are warning of danger, while resistance levels and the sectors are projecting optimism. If the divergence continues it will most likely signal the beginning of a larger correction.


Blair Jensen at Downside Hedge tracks Twitter sentiment and provides hedging strategies for individual investors.

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