Thursday, January 2, 2014

Avoiding Weakness: Outlook 3 January '14

after market update: actual S&P -0.68.  Much of the day was a hard attempt to stay positive, but the anticipated mild rally didn't hold until the end of the day.  Market's are now oversold relative to social mood. 

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Overview: Collective mood reflects global trends of aggression and violence, but almost as a desperate attempt to ward off perceptions of weakness or vulnerability.  Mood signals for the day indicate a mild market rally is likely.
 
Near Term: Global trends of aggression and violence should continue to be prominent.  Markets may get a boost from a collective adrenaline rush.  Near term social mood trend is positive.
 
Long Term: Collective mood is has not been keeping pace with the market sugar high, but there is no sign that a market shift is imminent.  The impact of human and natural disasters of late has been low, but the trend is toward increasing impact.  Over time, this may wear on both mood and socioeconomic stability.
 
Today's Signals: +4.1 from Google Hot Trends, +3.7 from Themes in the News.  The projected stock market change for today is shown in the chart below.

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Mood signals from Google Hot Trends: 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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Mood signals from themes in the news: 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.

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