Trying to Believe in Economic Recovery: Outlook 21 November '13

after market update: actual S&P -14.5 (-0.81%); Sometimes, belief is all it takes.  Markets were way up today, in spite of the negative mood signals.  Because markets are now overbought relative to social mood, there's a good chance of a sharp drop tomorrow.  

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Overview: People want to believe in the economic recovery.  Traders may push hard today, insisting that up is the way the market should be going.  Will their wishes be enough to make it so?  Social mood is reflecting aggression, agitation, and increased concerns with economic stability.  Themes in the news are reflecting an increasingly somber tone, deterioration, destruction, and/or disaster.  Markets are likely to be near unchanged to sharply down today.  A climax move may be near.

Today's Market Outlook is near unchanged to sharply down (0% to -0.7%);  both the social mood signal the signal from themes in the news are negative.  The social mood signal is in a heavy support area, so markets may have difficulty dropping further, resulting in choppiness.  The projected stock market change for today is shown in the chart below.

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Near term mood outlook: Social mood is reflecting aggression, agitation, and increased concerns with economic stability.  Themes in the news are reflecting an increasingly somber tone, deterioration, destruction, and/or disaster.  The combined pattern of news and social mood reflects a global perception of uncertainty, and rising economic concerns.  

 

Near term market outlook: The social mood signal has broken first support (1780) which puts mood (and market) in a near term downturn.  Longer term trend is expected to be generally up as long as the mood signal does not go below current levels (1760 primary support).  Social mood momentum is indicating that a trend change is approaching.  A climax move or pause in the downtrend may be near, as the social mood signal is in a heavy support area.

 

Longer term outlook: The overall social mood trend has been in what appears to be a topping process for many months.  There are no clear signals that this process will be over anytime soon.  Yet, a sharp market drop of more than 15%, likely within the next few months, is indicated by long term mood and market charts.

 

Today’s social mood signal is  -0.7 S&P points as of the time of this posting.  On a daily basis, markets tend to follow social mood more often than not. 

 

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Today’s news signal is -0.6 S&P points as of the time of this posting.  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.  Stock market data source: Google Finance.  This is posted as a public service, and to enhance exposure to our research.  It is not intended to be trading advice.