I mentioned last week that the 1905 level on the S&P 500 Index (SPX) was critical support without any other significant levels below which put the market in a precarious position. Here’s a quote from the post.

1905 on SPX is a strong support level. Below that there are scattered tweets, but nothing definitive. The lack of tweets below the market indicates hope and optimism from market participants. This can be dangerous near a strong support level because any break lower will turn hope into uncertainty and fear. 1905 on SPX is a must hold support level or we could see a cascade that carries price quickly to 1880 or 1850 where a small number of traders are tweeting support.

As it turned out 1905 was broken on Monday and SPX quickly fell to 1880. On Wednesday the next level of support tweeted by traders at 1850 was violated and SPX fell to 1820 before rebounding. The market is now just below the 1900 level and getting ready to retest the 1905 support level as resistance. This is the first hurdle for the bulls. The next two resistance areas are 1925 and 1955, with hope back at the all time high.

If the market turns over, support comes into play at 1875, 1850, 1800, and 1750. Some fear came out on the Twitter stream last week with several people tweeting levels as low as 1500 and 1600. The wide range in tweets below the market suggests a lot of damage was done to investor sentiment by last week’s sharp decline.

Another sign of decreasing investor sentiment is our social media momentum indicators created by quantifying Twitter and StockTwits messages. After painting a negative divergence with price in late September both indicators have been making lower lows which confirm the decline in the market. The odds favor lower prices until momentum creates a positive divergence or surpasses its last peaks.

Breadth between the stocks with the most support on Twitter and those with the least support (bullish vs. bearish) continues to decline. The most bullish list has the fewest number of stocks of the year, while the bearish list is approaching yearly highs. Traders are seeing fewer stocks as long candidates and more as shorts.

Sector ETFs on the Twitter stream shows wide spread damage in the market. Only energy and financials managed to print readings above zero last week. This is a small positive and most likely the place where leaders will emerge if the market is going to continue the current rally.

Overall social media readings suggest the market has some headwinds. Traders are showing fear and uncertainty with a wide range in price targets, the text of tweets is mostly negative, and fewer stocks are being mentioned as buying opportunities. The bulls need SPX to clear 1905 with Twitter and StockTwits momentum confirming the move by painting higher highs or the odds will favor a retest of the recent lows.