Here We Go… One Way Or Another

It finally looks like we’re going to get a short term top, but so far I’m not getting any strong signs that we’ve resumed the longer term down trend. One of the only chinks in last rally’s armor comes from breadth calculated between the number of bullish and bearish stocks on the Twitter stream. It turned down with price this week. It isn’t much of a dip yet, but if the trend continues then it’s likely that the bear market has resumed. During the November/December 2015 consolidation, breadth held steady as the number of bullish stocks held up. When the bullish count started to fall in late December it was warning of the subsequent decline. Currently, the number of bullish stocks is starting to decline and the number of bearish is rising. You can keep an eye on the daily chart here.

7 day momentum and sentiment for the S&P 500 Index (SPX) calculated from the Twitter stream is still coiling in an extremely tight range below zero. Over the past couple of days, the volume and intensity of tweets reached the same levels as the February lows. This is an odd occurrence so close to a short term high. High levels of activity and intensity are usually associated with lows. Right now, both the bulls and bears are very engaged in the fight so when the sentiment range breaks it should be accompanied by a violent move in price. I suspect that when the current battle between bulls and bears is won that everyone will pile on with the victors. You can follow the daily chart here.

The price levels to watch on SPX are 2080 and 2100 on the upside and 2020 on the downside. Those levels are garnering the majority of tweets. I suspect that if any of these levels are broken we’ll see 7 day momentum and breadth confirming the move.

Sector sentiment is showing weakness in financials. This is another chink in the rally’s armor, but a small one at the moment.

Conclusion

Here we go… one way or another. 7 day momentum is coiling with a higher than average volume and intensity of tweets, the number of bullish stocks is stalling at the last rally’s highs, and support and resistance levels are close at hand. If support or resistance is broken and accompanied by breadth and 7 day momentum we should get a violent move in the same direction.