S&P Dow Jones Indices is launching the S&P 500 Twitter Sentiment Index, which aims to use the Twitter API to track S&P 500 components that are trending in sentiment.

The novel use of Twitter's API scores S&P 500 Index components based on bullish and bearish Tweets. The scoring is done by aggregating Twitter$cashtags such as$WMT,$MSFT and$AMZN.

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So far, the S&P 500 Twitter Sentiment Index Series will include:

• A sentiment index that measures the performance of 200 S&P 500 constituents with the highest sentiment scores. Index constituents are float-adjusted market-capitalization-weighted.
• An equal weight version of the S&P 500 Twitter Sentiment Index that equal weights 50 S&P 500 constituents with the highest sentiment scores.

Now the analysis of$cashtags can come in handy to spot trending large-cap companies; the S&P Dow Jones Indices may get more mileage and attention by focusing on small-cap firms. Those firms are more likely to become the next meme stock.

Here are key points about the mechanics of the S&P 500 Twitter Sentiment Index:

• The indices will measure sentiment daily through an analysis of Tweets with$cashtags that reference an S&P 500 stock.
• Via the Twitter API, S&P Dow Jones Indices consumes tweets in real-time and gives a z-score based on positive sentiment.
• The scoring model is based on a training database that scores positive and negative words in a tweet.
• Filters aim to eliminate spam tweets.

More on sentiment analysis:

• SugarCRM adds 'sentiment analysis' to SugarPredict AI.
• Read AI wants to gauge your sentiment, engagement, talk time during meetings.

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