U.S. Mass Violence Threat Resolves: Outlook 26 December '13

after market update: actual S&P +8.7 (+0.5%).   Markets again continued up.  The divergence between social mood and markets is at extreme levels.  An abrupt shift is getting more likely.

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Overview: There has been a collective mood pattern coinciding with risk of small scale mass violence that has continued to linger since just before the Arapahoe High School shooting.  It is finally showing a resolution (all clear) as of tomorrow.  The social mood pattern for today reflects holiday merry making, but also self sacrifice for a cause.  Themes in the news reflect vulnerability to violence or attack.  Markets are near a "ceiling" area.

 

Mass Violence Threat:  Since December 8, 2013 a collective mood pattern coinciding with U.S. disasters and mass violent incidents has been observed and discussed here.  Of particular interest is the pattern observed with the Boston Marathon event, the Navy Yard Shooting, and the recent  Arapahoe High School shooting (see chart below).  The Boston Marathon was followed by the W. Texas fertilizer plant explosion, and then was resolved (shown by the orange line).  The resolution in the pattern after the Navy Yard shooting is shown by an orange line.  The Arapahoe High School shooting was followed by the Reno Hospital shooting.  Until the orange line shown for the 26th, there has been no resolution and another event has been anticipated.  As of the 26th, this pattern can be considered resolved.

 

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Today's Market Outlook is slightly up to moderately down ( -0.1% to +0.1% ).  Both the social mood signal and the signal from themes in the news are slightly on either side of unchanged, yet the market is overbought relative to social mood giving a slight edge to the downside.  The projected stock market change for today is shown in the chart below.

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Near term mood outlook:  aggression reflects holiday merry making, but also self sacrifice for a cause.  Themes in the news reflect vulnerability to violence or attack.  The combined pattern of news and social mood reflects general "bad news."  

 

Near term market outlook: The social mood signal is indicating a serious downturn in social mood that is likely to be followed by the markets. The signal is at a significant resistant point and may have difficulty moving up further-- i.e. markets may be hitting a "ceiling."

 

Longer term outlook: The overall social mood trend has been in what appears to be a topping process for many months.  This topping process appears to be in its final stages.  A sharp market drop of more than 15% indicated by long term mood and market charts, may be near.

 

Today’s social mood signal is +1.2 S&P points as of the time of this posting.  On a daily basis, markets tend to follow social mood more often than not.  Overall, social mood trend changes often precede market trend changes.

 

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Today’s news signal is -1.6 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.