Panic or Disaster Imminent? - Outlook 15 January '14

after market update: actual S&P +9.5.  Markets rallied to new record highs, and are now seriously overbought relative to collective mood signals which have turned sharply down.

 

(click to enlarge)

- - -

Overview:  Collective mood shows rising perceptions of deterioration or disaster. Themes in the news reflect a perception of instability and uncertainty.  Mood signals for the day indicate a wide market range possible, from little changed to a sharp sell-off.

 

Near Term: Global mood trends show sharply rising instability and perceptions of deterioration or destruction.  Near term social mood trend had been pushing against a "ceiling"(see Google Hot Trends chart below) but is now in process of turning down sharply. 

 

Long Term: Collective mood has been in a many month long process of topping, but there is no sign that a major market shift is imminent.  The impact of human and natural disasters of late has been relatively low, but the trend is toward increasing impact.  Over time, this may wear on both mood and socioeconomic stability.

 

Today's Signals: -19.8 from Google Hot Trends, +4.4 from Themes in the News.  The projected stock market change for today is shown in the chart below.

(click to enlarge)

 

 

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 usually precede market trend changes.

 

  (click to enlarge)

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.    

 

(click to enlarge)

 

 

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.