War, not diplomacy: Outlook 7 March '14

Overview:  Collective mood indicates a trend toward war and away from diplomacy.  A major crisis directly impacting the U.S. people and government is immanent (most likely before 13 March).  This may be a new development in the Ukrainian crisis or something else.  It may well be the greatest crisis faced by the U.S. in years.  Markets are extremely overbought relative to daily social mood signals.  Market direction for today is unclear.

Near Term: Mood signals have shown a sharp drop while markets remain at or near record highs (see Google trends chart below).  Since social mood trend changes usually precede market trend changes, a sharp drop in the near term is likely.

Long Term: Collective mood has been in a many month long process of topping.  Long term indicators are flashing "extreme caution," and are just below support, indicating a significant breakdown may be in progress.  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: +3.7 from Google Hot Trends, -0.5 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.