Scrambling, Arguing, and Blaming: Outlook 16 Oct. '13

after market update: actual S&P +23.4 (+1.4%); Markets soared as time came for the debt deal to be made and the crisis resolved.  That's when the blame game started.  Even with the deal, or perhaps because of it, Republicans are in trouble.  The high divergence between the timid collective mood signals and the action in the stock market will bear close watching over the next few days.  The relief seen in Wall Street does not appear to translate to the general public or world at large.  Here are some of the headlines coming in on the blame game theme, and frustration at the further arguing ahead:

The right's angry response to the House GOP's collapse

Boehner caves

Relief to be short in emerging debt deal

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Overview:  A U.S. government shutdown is in day 16, and participants should continue to be aggressively and desperately pushing their side's agendas.  The mood depicted by themes in the news is uncertainty, confusion, mania and the perception of "bad news"  Markets may be confused, jostled by every rumor and hope, but the overall outlook is down.

Today's Market Outlook is Confused, and Down (-0.1% to -0.4%).  At the time of this posting, both the social mood signal and the signal from the news are negative.  If the market turns down, the overbought condition of the market (relative to collective mood) may result in a sharper drop than indicated by the models.
 

Near term mood outlook: The social mood pattern corresponds with a desperate forward pushing.  Common themes associated with the mood pattern found in the news are uncertainty, the unexpected, chaos, protests, and terrorism.  The combined pattern, at times, accompanies global themes of violence, instability, and terrorist activity.

 

Near term market outlook: Social mood is hovering near support (see chart below).  A serious breakdown in the markets may begin at any time.

 

Longer term outlook: The social mood trend is down.  The overall market trend should be down. 

 

Today’s social mood signal is -5.1 S&P points.  Markets tend to follow social mood more often than not. 

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Today’s news signal is -1.9 S&P points.  News tends to follow the general trend of the market, but on a daily basis, can either lead or lag the movement of the market.    

 

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Note: data for U.S. social mood are scores in eight MoodCompass categories of Google Hot Trends, data for news are scores of top Google U.S. news stories.  Scores are converted to 4 inputs to the Market Mood Model.  The output is a conversion of mood data to estimated S&P point change.