I’ve posted warnings of a short term top for the S&P 500 Index (SPX) over the past couple of weeks and since that time the market has been choppy. I’m now seeing evidence of sentiment from the Twitter stream that indicates SPX is due for a move higher. The evidence suggests that SPX should break out of its recent range. The first clue comes from 7 day momentum which has moved down into oversold territory. The low readings come as the market is pushing up against the top of the current range (between 2040 and 2120) which seems counter intuitive. One of the benefits of a technical analysis indicator generated from Twitter is that the Twitter stream provides context. By looking at recent tweets we can see a pattern of traders shorting the top of the range. This is something I’ve seen a few times when the market has been trading in a range and over the past several years has resulted in a break higher rather than lower.

Breadth calculated between the most bullish and bearish stocks on Twitter remains healthy with the number of bullish stocks generally rising. The number of bearish stocks has had a slight uptick, but nothing significant yet.

Support and resistance levels gleaned from Twitter for the S&P 500 Index continue to show an important range between 2040 and 2120. With the current move back near all time highs traders have become more optimistic with their price targets. The recent rally has brought calls for the 2050 are on SPX. This increases the odds that the market will break higher from the range.

Sector sentiment is also giving positive indications with the defensive sectors showing negative sentiment and leading sectors mostly positive.

Overall sentiment from the Twitter stream suggests the market should move higher. 7 day momentum is oversold due to traders shorting the top of a range, traders are projecting higher prices and are mostly positive on individual stocks, and sectors show a move away from defensive stocks. Any move out of the top of the range should be quick as traders cover their shorts and people who have been idle buy the break out.