The Trade Followers momentum indicators for the S&P 500 Index (SPX) confirmed lower prices this week, but as I mentioned Thursday morning the indicators were at levels that suggested a bounce. Now that the market is rising it is important to watch the nature of the bounce. A bounce that carries Twitter and StockTwits momentum above their confirming downtrend line would be the first sign that many market participants believe SPX can return to all time highs. A higher low in momentum that is more than three weeks from today will confirm higher prices are much more likely.

I mentioned when the market became volatile in mid September that finance and health care stocks were holding up. Those sectors continue to hold support on Twitter and have been joined by technology over the past two weeks. If the market is going to rally into the end of the year it will need the strength of these sectors. As a result, their performance is the most important thing to watch over the next several weeks. If finance, technology, and health care stocks begin to fail it will warn of a larger correction in progress.

Breadth from both Twitter and StockTwits continues to trickle downward. The major reason is an increase in the number of bearish stocks. The market is starting to be sharply divided between strong and weak stocks. This suggests that traders are confident in short positions. The longer this situation lasts the closer we are to a top.

From a price perspective, traders aren’t showing confidence. There are virtually no tweets for higher price on SPX. That leaves the previous support level of 1980 as the first resistance line. 2010 and 2020 are the next levels of resistance. Support is at 1955 and 1905. A break of the range between 1955 and 1980 will most likely point the next market direction.

Sector strength over the past week is showing much the same as individual stocks over the past two weeks with technology and financials leading. However, health care showed strong bearishness this week. As mentioned above, keep an eye on these three sectors for clues to the next market direction.

Social media is giving some conflicting signals. 7 Day momentum has confirmed the down trend and traders aren’t calling for higher prices. At the same time strong support for finance and technology stocks give the market a chance to run to new highs. If SPX can climb above (and hold) its first resistance level of 1980 with support from leading sectors new highs should be ahead.