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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 sentiment indicators for the S&P 500 Index (SPX) from both Twitter and StockTwits issued consolidation warnings on Friday. The rally from 1900 to 1985 on SPX has been met with skepticism from traders on StockTwits and Twitter. As the rally progressed smoothed sentiment steadily decreased creating a negative divergence from price lasting two months. At the close on Friday smoothed sentiment broke sharply below a confirming uptrend line that had been in place for over three months. The break of the uptrend line after a negative divergence creates the warning.

Please note this isn’t a prediction of a long term top, merely warning that the market has lost support from active traders and investors. Recent warnings have been whipsaws that have been closer to market bottoms than tops. This is similar behavior to other indicators I follow and is a reflection of the willingness of people to buy the slightest dip over the last year or so. Nevertheless, the long term odds from this indicator suggest more decline in price.

Support and resistance levels generated from the Twitter stream remain scarce. Traders are increasingly reluctant to target prices above or below the market. This is a sign of indecision, caution, and waiting. Current levels show 2000 on SPX as resistance and 1925 as support.

Sector sentiment suggests a rotation to safety with defensive sectors showing strength and leading sectors lacking support from the Twitter stream.

Overall sentiment is suggesting more weakness ahead for the market. A consolidation warning was issued this week, traders still won’t target higher prices, and sectors are suggesting a rotation to safety.


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

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