Here We Go Again

Just a quick update this week. It looks like the market is going lower again. On Friday momentum and sentiment calculated from the Twitter stream for the S&P 500 Index (SPX) printed a -21. Readings more extreme than -20 near a short term high are usually an initiation thrust to the downside. This condition usually results in at least a few more days going lower. To make matters worse 7 day momentum is turning down from a confirming down trend line and also from below zero. The last three weeks of rally didn’t convince market participants that the market will continue to rise.

Breadth calculated between bullish and bearish stocks drifted sideways while the market rallied. Both bullish and bearish stocks are falling. It’s the same pattern we’ve seen during the entire rally, which points to value buying while selling leaders.

Conclusion

Something needs to inspire market participants or the most likely path is a trip back to the August lows. If that happens the bulls desperately need to see a positive divergence in 7 day momentum. A lower low in momentum would indicate the retest won’t hold very long.