Originally published here on February 16, 2014.

The Downside Hedge Twitter sentiment indicator for the S&P 500 Index (SPX) painted a series of higher lows on a daily basis as the market ground higher over the past few weeks. The bulls are holding their confidence level and the bears quieted a bit ... until Friday. The break higher on Friday substantially increased the intensity of both bulls and bears. This suggests that a hard fought battle may occur during the coming week. The bulls won the battle on Friday with a moderately high reading of +16.

Smoothed sentiment is rising slowly out of a "V" shaped bottom from price which is another indication that not everyone believes in the current rally. It has managed to paint a higher low on a very short term basis. I've added a new up trend line that we can use for early warning, however, as most of you know, I prefer peaks or valleys that are at least three weeks apart to establish a new trend. As a result, I'll most likely redraw the trend line over the next few weeks. I'll be watching for smoothed sentiment to move back to the level of the last short term peak as strong confirmation of the current rally. While a break below the newly established uptrend line and zero would warn that the market will most likely consolidate.

Support and resistance levels generated from the Twitter stream continue to show caution by traders. They are still reluctant to tweet any level substantially above the market. It wasn't until Friday that calls started to appear for the 1880 to 1885 area on SPX. For now it's the only projection we have as resistance. 1850 generated more than ten times the volume of any other level which illustrates how important it is to traders. Now that SPX has moved above 1850 it becomes support. The other levels of support are 1840 and 1800. It is very important for SPX to hold 1850. A close back below that level would indicate more sideways action is ahead.

Sector sentiment remains modestly bullish with leading sectors showing a positive, although low, bias. Defensive sectors are still mixed with Consumer Staples out of favor, but Utilities and Health Care with high positive readings.

Overall sentiment is painting a bullish, but cautious picture. The daily indicator is only managing moderately high prints as SPX moves to all time highs, smoothed sentiment is diverging from price, and traders are still reluctant to tweet prices well above the market. Smoothed sentiment is above zero and starting to paint higher lows so I have to give the advantage to the bulls if they can keep price above 1850 on SPX.

Note: I've created a video that focuses on how I use the indicator to trade individual stocks.

Here's some written explanation about the video that clarifies some things and also describes what the annotations on the charts mean.

Here also is a download page so readers can load the sentiment indicator into their own chart packages. It's located here.

Here is an earlier YouTube video that a basic explanation of the indicator.

For additional background information on this indicator, see Gauging Investor Sentiment with Twitter.

Blair Jensen at Downside Hedge tracks Twitter sentiment and provides hedging strategies for individual investors.