Bear Market Sentiment Is Here And It’s Thriving In The Broad Market

S&P 500 sentiment, as measured by messages posted about the $SPY, was clobbered all week long. Take a look at the number of red bars:

SPY

But while sentiment in the $SPY continued to remain depressed, elsewhere things improved markedly this week, with the Nasdaq-100 ETF ($QQQ) returning to a state of optimism. All of this brings up an interesting question. There was bullishness in tech but extreme bearishness about the broad market – which side will you take?

QQQ
The latest installment of the StockTwits Stock Sentiment Screener contains a number of stocks to watch including some downtrodden energy stocks that the community is turning Bullish on as well as several stocks which gave shorts a black eye. For each stock symbol, the screener counts the percentage of Bullish and Bearish tagged messages on StockTwits. Then it filters for stocks which have experienced a large amount of Bullish or Bearish message volume. These have tended to remain “in-play stocks” for the week ahead.

 

Group RR: Rising Sentiment + Rising Price

This group filters the market for stocks which have a combination of rising price and rising Bullish sentiment.

RR

Group RR tracks stocks which are experiencing bursts of Bullish sentiment during price increases. Weight Watchers ($WTW) tops the group chart, with over 1 out of 3 messages expressing Bullish sentiment; the stock rallied around 35% on the shortened trading week. As of late, $WTW’s share price has oscillated like a crash dieter’s waistline. Back in October of 2015, $WTW hit the radar when it was revealed Oprah had acquired a stake (and in a bit of activism could thus use her extensive network to talk her trading book— which she promptly did). The news sent the stock rocketing from a little more than $6 / share to above $26 / share by mid-November. Then the market sold off and took $WTW along with it, pushing it to an $11 handle last week.

TWTR

The lid came off Twitter’s ($TWTR) share price this week, with the stock rallying 15% propelled by a wave of Bullish net sentiment flow. Back on January 30th, the sentiment screener identified $TWTR as a stock experiencing rising Bullish sentiment despite a falling price. Since then the stock has experienced a significant rally in price as well as a continuation of positive sentiment flow.

GPRO

Since reaching a high of around $87 / share back in October of 2014*, GoPro’s ($GPRO) investors have been subject to a white-knuckle down-hill mountain bike ride of terrible returns. The stock face-planted at the beginning of February, trading below $10 / share at one brief point but $GPRO has since rallied modestly. Sentiment has improved dramatically since making lows, and this week the trend continued with 28% of message flow expressing Bullish sentiment against only 5% on the Bearish side.

*cool timing given the Treasury Flash crash, no?

FitBit ($FIT) tells a similar tale of price and sentiment: the stock price has been cut in half this year alone. However, this week sentiment turned extremely Bullish in the stock as the price rallied into the close of trading.

FIT

 

Group RF: Rising Sentiment + Falling Price

This group detects stocks which are experiencing falling price and increasing Bullish sentiment.

RF

The 3 out of the top 4 slots of this group are occupied by energy related companies this week. I won’t beat a dead horse, we all know energy names haven’t been the best performers of late with the price of energy taking a dive. That doesn’t mean everyone agrees they should continue to decline, however, it seems the StockTwits community is searching for bargains in some energy names, with spikes in Bullish sentiment in stocks like Marathon Oil ($MRO) despite continued price declines in the energy sector.

 

Group FR: Falling Sentiment + Rising Price:

This group finds stocks which have risen in price in the face of falling sentiment.

FR

In what seems to be somewhat of a trend this week, the share price of Fossil ($FOSL) ripped the faces off any short-sellers who were late to the party. Previous stock screeners have marveled at the stock’s near continuous decline all of 2015. Every dog has his day, however, and this week $FOSL rallied 33% with their latest quarterly earnings report as the causa proxima but as we have seen, this week had a bunch of stocks with a lot of juice to  squeeze.

Oh yeah, and then there was NetFlix ($NFLX). This guy is always hanging around the screener… although usually its for a good reason. Last week we saw $NFLX in Group FR (falling price + rising sentiment) this week its in Group RF (rising price + falling sentiment). Sentiment turned particularly Bearish into the close of the week on Friday.  This was after giving back Wednesday’s rally. As far as objects of speculation go $NFLX is decidedly one of the most exquisite beasts roaming the financial wilderness, and as the screener has born out time and again should be in any short term trader’s watchlist because its perpetually being talked about (i.e. “in-play”).

NFLX

 

Group FF: Falling Sentiment + Falling Price

This group screens for stocks which have a combination of falling prices and increasingly Bearish sentiment.

FF

While Group RF (rising sentiment + falling price) contained the energy stocks people may have been positioning for a bounce, Group FF (falling sentiment+ falling price) contained energy stocks which have yet to attract positive attention from the community. Range Resources ($RRC), Continental Resources ($CLR), Apache ($APC), and Transocean ($RIG) all experienced declines in price matched by increasingly Bearish sentiment flows.

Also notable was the level of Bearishness on ultrashort (read: inverse) biotech ETF $BIS which declined 9% as the sector rallied. The community is piling into the short side hoping to capture some of that leveraged ETF (LETF) tracking error I briefly mentioned in past screeners. If you want to learn more about LETF path dependence check out:

https://www.math.nyu.edu/faculty/avellane/LETFSlides.pdf

 

Group POLAR: Sentiment Divergence

This group screens for stocks which have a large number of Bullish and Bearish messages occurring at the same time.

POLAR

The community has a lot to discuss with Tesla of late ($TSLA). How will its affordable new Model 3 impact its bottom line? What does it mean that the price has a year to date trading range of $75 (high 225 low 150)? This level of uncertainty has led to an almost perfect balance between Bulls and Bears. You can see this in the table above (11% Bullish message flow vs 10% Bearish flow) and the chart below, where the net sentiment flow rarely deviates from perfect balance despite the large amount of message volume which $TSLA attracts.

TSLA

 

– For the Quants you can get access to data like this using the StockTwits API.

– Make sure you follow the author of this piece MKTSTK and visit his website for more data and analysis.

 


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