LunaticTrader

Investing with the Moon

Posts Tagged ‘Stocktwits’

Stocktwits is overtaking Zerohedge

Posted by Danny on March 7, 2017

Stocks are pulling back a bit since their March 1 peaks, but nothing dramatic so far. The S&P 500 has now gone 99 trading days without a 1% down day, so if stocks don’t drop today this move will join the 100 day club. That hasn’t happened since 1995.
Let’s have a look at the Nasdaq chart:

^COMP (Daily) 6_29_2015 - 3_6_2017

All my indicators have turned down, so March 1 may have been a major peak. But we have to watch carefully what happens next here. If the current pullback stays short and shallow or sideways then it will probably be followed by another 5% surge higher. Such a shallow pullback could see Nasdaq test 5800, but not much lower than that.
This market has been doing all the right things, as described in my December post, and that means a final strong advance is quickly becoming the base scenario. One of the main conditions is an S&P push to 2500-600 before summer and that doesn’t look so crazy anymore.

If we get that kind of blow-off peak scenario then we should start seeing the typical symptoms that come with it. Look for reports that a lot of new investors are opening brokerage accounts and buying stocks for the first time. And a much more buoyant mood on popular investor hangouts like Stocktwits. At the same time look for known bearish sites to become less popular. Once retail investors cave in and put more of their savings into stocks their appetite for bad news, bubble warnings and bearish commentary goes down. I like to use Google Trends to keep an eye on it. For years I have been expecting that Stocktwits would become more popular than Zerohedge by the time this market peaks. And that seems to be happening now:

zeroh-sttw

(source: https://trends.google.com/trends/explore?date=all&q=stocktwits,zerohedge )

The surge for Stocktwits shows that retail investors are quickly warming up to this market. Meanwhile Zerohedge seems to have lost about 20% of its audience in recent months. If those trends continue and Stocktwits clearly overtakes Zerohedge then it will be a very significant indication. And then the difficult job will be to determine when and where this love affair with stocks will end. Such a final surge typically lasts between 8 and 18 months.

Posted in Market Commentary | Tagged: , , | 7 Comments »

On broken clocks and social networks

Posted by Danny on May 12, 2014

Even a broken clock is right twice a day. It is a classic saying, but it is only partially true. In my birth region there was a pub with a broken clock that was right four times a day. It just moved backwards! I suppose it was designed as a practical joke, and more importantly, as a way to give the pub’s customers a good excuse to come home late after a few glasses too many.

How is this relevant for investors? Well, markets can be cruel, not so much because they are cruel, but because some investors have a deeply rooted habit of being cruel to themselves. Give some folks a bull market and they will start selling short or bet on put options. Then let a bear market begin, and for some reason they change strategy and start “buying the dips”. This are the backward clocks of the market. They get it right once in a while, but they are drawn to the wrong side of the market like moths to bright light. And these investors can provide as useful a service as the experts who get it right most of the time. If somebody is wrong fairly consistently you can make good money by taking the other side of their market calls. If you can find the worst investor you have found a gold mine.

Of course these investors are not easy to find, but social networks are making it a lot easier than it used to be. Because there are some typical characteristics that set them apart on those networks. They tend to be sarcastic and cynical in their remarks. They continue to repeat the evidence that supports their position while blaming the fact that their forecast hasn’t panned out yet on being a bit too early with their call. And when the market continues to go against them, as it often does, they start blaming it on manipulation by banks, markets being rigged, high frequency trading, the weather, and so on.. If you can find such traders on social networks or blogs, follow them.

Where to look? Besides Twitter, I use Stocktwits, and Scutify, which is a new social platform that is starting to grow nicely. Check them out. Some services are also starting to use social network streams to generate useful sentiment indicators. Downside Hedge is a good example. I think this kind of indicators will become better and better. With a bit of Bayesian logic these indicators will not only reflect what kind of market calls are being made, but also who makes them: a reliable expert or a broken clock.. And that will level the playing field again, because right now banks and brokers already have that kind of information. They can see what positions their clients have and what kind of orders they have in the market. Would you be able to win at a poker table if you can see the cards of some of the players, but they can’t see yours?

Let’s end with our weekly look at the S&P 500 (click for larger image):

S&P 500

The S&P 500 has gone mostly sideways since the start of the current lunar red period. This is completely in line with our main scenario. We have another week of red period to go, and my indicators still display bearish divergences all over the place. But as the market drifts sideways near record levels the odds are rising that the S&P will climb above 1900 before giving way. Sometimes markets take the path of max confusion.

Good luck,

Danny

 

 

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Posted in Financial Astrology, Market Commentary | Tagged: , , , , | 6 Comments »

 
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