Climax: Outlook 6 Feb '14

after market update: actual S&P +21.8  Markets were way up today in line with the resolution and "climax" signals we were picking up (see below).  It may be that the recent winter ice storm in the U.S. which resulted in disaster declarations in several states, and with hundreds of thousands still without power, IS the resolution of the disaster signal (along with the market recovery).  It was mentioned that a natural event would likely be volcano or flood (i.e. heavy precipitation), and the plentiful ice breaking power lines and trees would fit this, although it was not specifically considered.  We are still looking for a clear resolution signal to know this pattern is fully completed.

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Overview:  Collective mood indicates rising uncertainty and increased risk of violence, protests and terrorist activity.  Mood signals for the day indicate a continued selloff in the markets is more likely than not.  The U.S. disaster or major tragic event signals we have discussed (see 31 Jan. post), appear to be resolving.  We will discuss this further at the end of the day.

Near Term: The social mood trend had been turning down sharply, but after briefly bouncing off support has been scraping along it near S&P 1740 (see Google trends chart below).  It has now broken down below that support indicating further downside in the markets is likely. A climax followed by a near term bottom may be quickly approaching.  There is strong support near S&P 1725 if the 1740 area doesn't hold.

 

Long Term: Collective mood has been in a many month long process of topping.  Long term indicators are flashing "extreme caution," yet seem to be pausing at long term support.  The impact of human and natural disasters 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: -5.5 from Google Hot Trends, -0.8 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 usually 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.