Who's Afraid of the New Year?: Dec. 31, '16 - Jan. 6 '17

I can't tell you how your year is going to go, or mine for that matter.  Yet, for whatever reason, the top things we focused on a few weeks ago, the top internet search trends, are related to what's coming in the news, the markets, and even our own lives in the week just around the corner-- the week of the New Year!

The bringing in of the New Year is a time of hope and celebration.  Surely, it has to be better than the year we just had!  I'll leave it to others to compare the years, but we can get a glimpse at what might be different about the coming week from the week we just had.  In general, there should be a lot that's very similar to last week, but the part that's different, well, "Happy" may not be it for this New Year.
As I write this, I am still feeling the impact of more famous people of 2016 that we've lost this week (which is yet to be somehow woven into the events of a few weeks from now).  I am left wondering if as a society, we are in the midst of some kind of positive feedback loop. I feel obliged to give a warning, before you read further, that while this is based on research that is backed up with data and repeatable results, it may be a bit too different from current assumptions about how things work to be comfortable for some to consider.  If you must stop reading now, ranting about how this is all B.S, or other choice words, it would be understandable.

The top trends from the period reflected in the week beginning New Year's Eve and going through Friday January 6, 2017 have some similarities to those from the week before (see Forced Optimism: Dec. 24-30, 2016).  Just like last week, several of the trends reflect a strong masculine quality.  Dallas Cowboys, Lamar Jackson, Army Navy 2016, and the Patriots are all related to men's sports, specifically football.  In the trends pertaining to last week, there was also a male hero who died, John Glenn.  That goes up to two well known men who died this time-- Alan Thicke, best known as the father on Growing Pains, and Craig Sager, a sports reporter.  Similar to those for last week, the remaining three trends are related to entertainment.  Rogue One Trailer, the Star Wars spinoff movie, gives us a space adventure with a bit of nostalgia.  The Voice, a singing competition TV show, many find fun to watch.  The third one, Flip or Flop, has a twist to it.  This show about house flipping made it to the top trends because the couple hosting it is getting a divorce.

It's the difference between these two weeks that stands out to me.  An increase in themes about well known men who died and a focus on a break up instead of the show itself.  Just this alone, does not imply to me, a cheery way to start the New Year.  Let's look at it a bit more scientifically using the MoodCompass method, and see if that gives us a different picture.

First, the nine trends are broken down into themes: man, family, nostalgia, death, sports, loser, adventure, trophy, military, school, home, relationship, divorce, TV, music, winner, and reporter.  These are scored, and those scores are "normalized."  The result gives us relative amounts of four mood qualities¹: 14% Vulnerable, 38% Expansive 13% Manic and 36% Controlled.  In graphic form it looks like this:



There are two primary patterns I see in this.  1) A change in "optimism."  The previous week's optimistic High Expansive/Low Vulnerable pattern gives way as Manic becomes the low point.  Optimism, the "Happy" part of Happy New Year, appears to be losing its edge.  2) High emotions, especially fear or even panic is reflected in the High Expansive-Controlled pattern.  Putting these two patterns together, reaffirms my suspicion of a less than happy New Year's week in the news, in the markets, and in the overall ambience of many of our lives.

While societies have little choice as a whole, as individuals we have an array of responses and coping methods.  This is a heads up as to what the overall trend is for one week. It's not a week to expect people to be their most reasonable or rational selves.  Yet, it's certainly no reason to give up on a personal commitment to having a Happy New Year.  With this awareness of the general trend of the week, I will make an added effort to be around people that give me smiles and a sense of safety and well-being, and will commit to doing my best to keep my own head on straight.  Perhaps you can come up with ways to bring in the very best New Year for you.

At MarketMood.net, we also convert this information into expected market behavior for the week.  This particular week of emotional transition will have a different effect on the stock market, crude oil, the U.S. dollar, and gold.  We explore that in our member trading room. 

Forced Optimism: Dec 24-30, 2016

I can’t say what anyone in particular will be feeling next week, or how your particular family may get along or not for the holidays.  However, in general, the social mood for the Christmas weekend through the end of the week is not the best for the coziest of holiday gatherings.  I know this from looking at a few internet search trends, the ones we all said mattered most to us a couple of weeks ago.  For whatever reason, what we focused on a few weeks ago, is what shows up in the news, the markets, and our personal lives in the week just around the corner.

The internet search trends that give us a peek into the social mood for the week of Saturday December 24^th through Friday the 30^th are really strong in “masculine” heavy items.  Three out of the top seven are football teams (Pennsylvania State, Raiders, and Dallas Cowboys).  Add to that a legendary man, space explorer and hero, John Glenn.  The remaining three are performance and art related.  There’s Hairspray live, the musical; Fantastic Beasts and Where to Find them, a movie primarily for children; and the Victoria Secret Fashion Show, primarily for grown-ups.

Extracting the major themes contained in the seven search terms we found: men, sports, winner, loser, school, music, live, hero, nostalgia, death, movie, children, model, and show.   These themes are scored, and after those scores are added and “normalized” what we end up with is relative levels of four primary mood qualities.  For this week, 13% Vulnerable, 50% Expansive, 16% Manic, and 21% Controlled.  In graphic form it looks like this:

 

To get to the “not the coziest” conclusion, requires analysis of the relationship of these four mood qualities.  This is what I see in this week’s social mood configuration: 1) High Expansive/low Vulnerable is associated with optimism, and with heading in a direction or specific way forward.  2) Expansive/Controlled being the two highest goes with high emotions, passion, and/or panic.  3) Expansive high and the other three much lower is associated with “bravado” or putting on a show of competence, leadership, optimism, etc.   In other words, “forced optimism.”  While #1 could add a bit of jolliness to a party or gathering, in combination with #2 and #3, this same component could look like arrogance, stubbornness, or strong opinions.  If your group has a good “diplomat” (a trait of "Vulnerable" which is needed to balance "Expansive") things may go fine.  If not, don’t be surprised to see some head butting.

The way this mood pattern might show up in the week’s news events would be a focus on geopolitical or presidential “chest pounding,” some passionate responses or panicky behavior or expressions, and a sense of show or overdoing it.  With “Vulnerable” low, it’s not going to be a good week for diplomacy in general.

One thing further we do at MarketMood, is translate each of these mood components into stock market behavior.  For this Christmas holiday week, here’s what we might expect the market to do with those same three mood components: 1) a directional push, likely bullish, 2) a bearish drop, and 3) an exhausted market’s attempt at remaining bullish.  Our algorithm would add these three together to get a likely overall direction.

So, if you can’t find a cozy space for the holiday week, perhaps you'll experience a jolly one.  If not that, it’s certainly a good time to put on a smile and just get through it.

MM Presidential Indicator Wins!

This may seem like old news, but it's a win today for the MM Indicator...

Because the MM Electability Indicator is 5 days lagging the social mood data, we developed the Campaign Momentum Indicator to try to get around this (i.e. the momentum of the Electability Indicator).  It was found that using an adaptation of Elliott Wave analysis, it was possible to make an educated guess about what was coming next in momentum, as the changes in the CMI seemed to follow clear Elliott Wave patterns.  This worked well for the debates.  A few weeks prior to the election it looked like a 3rd wave was about to take place.  However, we gave this caveat:  "If this is a correct assessment, this would mean that there should not be a last minute bounce for Trump nor a last minute fall for Clinton.  These would be impulsive structures, and the campaigns would be both at juggernaut momentum in their respective directions coming into the close."

Shortly after this, the Comey FBI announcement came out which dramatically altered the Clinton campaign momentum.  This gave us pause, but we waited until the day of the election to give a final call.  At that point, a clear 3rd wave could not be seen, but there was still a good chance that one was "trying to."  We gave Clinton a 60-75% chance of winning at that point, and had to admit that it was much less a sure thing, as the wave pattern no longer looked like a clear impulsive Clinton wave.  Also, competing with the CMI, was that the Electability Indicator was clearly showing Trump as "trying" to have an impulsive 3rd wave up (1-2 i-ii in place).

Today's social mood data, due to the lag in the Electability Indicator, brings us to Nov. 8th.  The final results give Clinton a 33.0% and Trump a 32.7% in a national election (see below).  While this does not take the electoral college into account, this is a great reflection of the close race and Clinton narrowly winning the popular vote.  It also shows how timing is everything.  A few weeks prior, Trump would have won in a landslide.  Just a few days later, we might now have a president Clinton.

Calling the Presidential Election

The social mood signals we use give us information about the markets several days ahead.  We've developed a polling indicator, and while tracking well, gives info that is about a week old.  We found a way around this impediment buy using the momentum of projected polling changes.  By combining the Campaign Momentum Indicator and an adaptation of Elliott Wave analysis we were able to obtain useful information before the 1st and 2nd presidential debates (we abstained from the 3rd).  Today is election day, and while leaning in a direction, we have to admit that the alternative has not been ruled out.

The base case outlook is that Trump is in a 3rd wave down and Clinton in a 3rd wave up, and that each is about to experience a 3rd of a 3rd in their particular direction.  For those not familiar with Elliott Waves, this means a really big blast in that direction-- the grand finale.  However, the way this has played out has left it somewhat ambiguous, and leaves a less probable, but not unlikely possibility that Trump has completed a c wave and beginning a new uptrend, and Clinton would be in a similar situation (not shown on chart).  It looks cleaner (to me) with the 1-2 i-ii count, ready to blast into a 3rd of 3rd.  However, I won't know for another week how this chart actually played out for election day.

Final call: Clinton winning is most probable, but not clear cut certain.

2nd Presidential Debate: Trump's Comeback?

The first debate was easy to call.  We were able to use our Campaign Momentum Indicator and an adaptation of Elliott Wave analysis to see that the debate would mark a peak for Trump and a low for Hillary.  Since that day, the Trump campaign has taken a dive, and Clinton has had a relatively easy time of it.

For this debate, there is no easily identifiable Elliott Wave "abc" pattern to tell us the next move in each candidate's campaign momentum.  Without that available, we will simply have to look at the current momentum reading and infer what that might imply about tonight's debate.  Hopefully, by the 3rd debate, and especially by the election a clearer pattern will be emerging.

While the last couple of weeks has been quite bad for Trump, the CMI shows at least a pause of this decline, and even perhaps a mild rebound.  The indication would be that he should do better than expected in this debate, and possibly make some people reconsider supporting him who had been turned off of late.  Clinton's campaign momentum is near zero.  The expectation is for her to hold her own and not really change many minds for or against her.

Social Mood Clues to Monday's Debate

For several weeks now, we've been looking at the idea of Presidential Campaign technical analysis using a social mood derived Campaign Momentum Indicator and an adaptation of Elliott Wave analysis.  Our last prediction was that Trump would see a gain in the polls and Clinton a drop (which we have been seeing).  Both campaigns have been following a "corrective" structure of some type, and this most recent "c" wave or 5 wave move in each campaign should signal a completion of that direction.

What this means is that Trump is likely at a peak in gaining poll points and Clinton at a low in losing poll points.  If this is the case, then it would make sense for Clinton to win the upcoming debate on Monday in the eyes of most voters. However, because we haven't yet seen evidence that either of these "c waves" have climaxed (i.e. begin to turn in the other direction), the debate may be Trump's final triumph, and Hillary's last big stumble just before things turn around.  Let's see what happens.

Presidential Pins and Needles

I've been discussing "Presidential Technical Analysis" over the past few weeks, and we've been combining a social mood derived Campaign Momentum Indicator and an adaptation of Elliott Wave Analysis.  I've been doing a weekly update on this on Sundays, but this just can't wait!
As of the last post, we were wondering whether Trump was experiencing a corrective increase in momentum (as informed by social mood data), or whether his new uptrend would be impulsive and give him an almost guaranteed victory.  It looks pretty clear at this point, that this uptrend is corrective, and will not yield a default victory crown.

However, the surprising new development is what is going on with the Clinton campaign trajectory (see chart below).  We expected her to have a tough week or two with a sharp "c wave" drop coming up for her.  Yet, the rebound from that sharp drop is only three waves so far.   A critical moment is just ahead!  Either she will get one more upward move soon, giving her five waves up and a new surge in momentum, or her entire campaign is about to "crash" in what would be a devastating not yet completed c wave down that could last well into October.  It wouldn't be impossible, but it would be nearly so, to recover from such a devastating blow in time for a win in November.
Stay tuned!

MarketMood, Elliott Waves, and the Election

Last week I introduced a Presidential Campaign Momentum chart (link).  One thing that came from the discussion was a recognition of Elliott Wave patterns in this social mood derived chart.  A "b wave top" was spotted for the trajectory of Clinton's campaign and a "c wave low" for Trump.  From this labeling (shown below) we expected the next wave for Clinton to be 5 waves down.  For Trump, an up move was expected next with possibly the entire election hinging on whether the next wave set for him is a 3 wave corrective move up or a 5 wave impulsive one.  A 5 wave move up for Trump would be just the beginning of a new strong surge in the polls.

It is fascinating that we were able to call the direction of the next wave set using this combination of Elliott Waves and the MarketMood social mood data.  You have the exclusive information here that the entire presidential election could very well rest on the next week or two.  That is, not what the candidates do or say in the next week or two, but what the pattern is in the social mood data.
Looking at our momentum chart, Clinton has 3 waves down so far, and Trump 3 waves up.  They are both on a possible wave 4.  The sharp drop for Clinton does appear right for a 5 wave drop.  Today's health news could end up being a part of the 5th wave.  Trump's rally so far has more of a corrective look to it, but we will have to wait a few more days to clearly see if he is working on a 5th wave up, or beginning another 3 wave drop down.

Presidential Technical Analysis

Just for the sake of this discussion, leave the fundamental analysis (and personal opinions about the candidates' character) at the door.  What if these were two stocks you were considering trading, and all you had was this momentum indicator?  What I see is a series of lower highs for Clinton, with current momentum at 0.  I would wait before buying this one.  The Trump stock is clearly more volatile, and the previous high was a higher high.  I would watch this one carefully for the next turn up in momentum.  However, at this point I would have to stand aside on both of them.  What would you do with these "stocks?"

Keeping Watch on Sunday (August 7, 2016)

Overview
Sunday may be a very important day in the scheme of things, and according to the mood generated forecast, may have a significant impact on the entire week.  One thing to watch for, which will confirm a bearish immediate forecast is evidence of Sunday's Mood/Effect polarity flip.  Every 1-3 weeks, the effect of the current mood pattern inverts, and what was a positive mood brings negative effects.  Sunday should start out very positive or bullish.  At some point there should be a shift to a strong bearish mood.  This may or may not occur before futures open, but would have to occur before markets open for regular trading hours on Monday.
Qualitatively, the mood pattern points to geopolitical issues as a likely focus.  The YTD chart is pointing down through Tuesday (assuming the polarity flip occurs Sunday).


MMI Monday RTH open: down.  MMI Monday close: down (below open).

The Details

I. Stock Market Forecast
Big picture:  Looking for a sharp drop followed by a sharp rally.
Latest forecast info:

SPX	MM Trend Signal	MM Daily Trade Signal	H.P. Trade Signal**
8/8 (open)	UP	DOWN	NONE
8/8	UP	DOWN	NONE
8/9	UP	DOWN	NONE

**Higher Probability SPX trades have a 5-10% higher success rate than standard MMI trade signal, i.e. approximately 65-70% vs. 60-65%.
Today’s action: N/A
Hypothetical next trade: Short SPX MOO¹ Monday.
¹ MOO is market on open.     ² MOC is market on close.
II. Social Mood Pattern Analysis (this bonus section is provided on occasion to assist readers to gain further insight into how analysis is developed)
Themes in search trends for Sunday's mood data: movie, wrongdoing, hero, critic, criticize, image, communication, business, woman, mother, violence, death, police, technology, denial, news
Combined MoodCompass scores: .2N  .4E .8W 1.2SW 1SE .2NW =>  11% NE (Vulnerable)   39% SW (Expansive)   28% SE (Manic)  22% NW (Controlled)
Mood / Effect inversion status: Normal (since 7/31); inverts 8/7..
Qualitative Analysis notes (refer to Mood Qualities Timeline, below):   Sunday: SW high, NE low => strong bullish flips to strong bearish as inversion hits.  NE much lower than other three => watch for geopolitical escalation.  NE lowest => Not conducive to diplomacy or "nice."

Like what you see?  This is a sample post from http://marketmood.net.
Come visit!

The Mood Pattern of Terror

There is an identifiable social mood pattern that is associated with social disruption.  The types of events included in social disruption are protests, strikes, riots, “random” mass violence, and terrorist activity.  An example of this pattern can be seen below in the monthly mood configuration for June.  The basic pattern is high Manic and low Controlled (with mood/effect inverted as it is currently).  When the second highest mood quality is Vulnerable, it ends up being more ideological (e.g. protests and strikes).  When the second highest quality is Expansive, it tends to be more violent.
 

Time scale is important as well.  When this pattern shows up on a daily scale, the events that may arise near that date could be of little significance to the general public and may not even make the news.  On a weekly scale, something in the socially disruptive category is more likely to show up in the news.  On a monthly scale, such as what we have in June, there is almost certainty that a highly significant event or events of this type will be in the news, and will have an emotional impact, at the very least, on the American people (since the measure is U.S. mood).

On June 12th, around 2am, the tragic and unfortunate shooting in Orlando occurred.  One can hope that the largest mass shooting in American history would be sufficient to satisfy a monthly scale disruptive mood configuration.  Yet, while not a certainty, there is an indication that something else may be next.  The exact same social mood pattern for the month of June showed up on a daily scale on June 11th, the day before the Orlando shooting.  It shows up again on June 26th (see June daily mood timeline below).  While a daily scale configuration is not usually of newsworthy significance, when it matches the larger pattern, it may be an indication of specifically when it may show up as part of the news cycle.

This is not being shared to create fear or terror.  It is a reminder to use the due diligence that is always important.  That is, staying aware of our environment and looking for unusual activity or behavior in the people around us, and for anything especially out of place.  This is especially true for the next couple of days.

How does this relate to markets and trading?  There is often (but not always) a climax event at a near term bottom, which also happens to be likely in the next few days.

Update: 6/26/16 3pm Pacific Time 
It's not terrorism, but this certainly fulfills the criteria.  Hopefully with no one dying this time: Protesters, white supremacists clash at State Capitol.  Officials: 5 people stabbed, 2 critically injured

Update: 6/28/16
No such luck.  Terrorism strikes again.
Suicide bombs kills 28, wound dozens at Istanbul airport

MarketMood Weekend: A New Paradigm

The past week has had its fill of sideways, meandering, and confusing moves.  While this may have been frustrating, there is some good news!  The mood pattern over the weekend signals a new paradigm.  This will usually signal the beginning of different market action, a new Elliott Wave subwave, a new focus, and a new news cycle.  Here’s to a new beginning in the new week!

MarketMood Indicator for Monday open: UP.    

Want to know more about what the markets might be up to next?  Go HERE.

Not the Edge of a Cliff, Yet...

If the stock market is going to fall sharply, as some are looking for in the month of May, this isn’t the week it’s likely to happen.  While we may (or may not) be in the midst of an Elliott second wave down, from a sentiment perspective, we are hovering at a strong support line that thus far has refused to give way.  While it’s hypothetically plausible that a large market selloff could happen first, and then people would get really down in the dumps about it, mood almost always precedes market.  Right now the mood says, “No, not going down there yet.”

(click to enlarge)

The chart above shows the MarketMood Indicator daily signal vs. S&P close year to date.  Back in March through early April, the Mood Signal, after some struggle, broke above the 2100 resistance line (see chart).  In late April, the market finally reached this level, but couldn’t maintain a solid break above it.  The Mood Signal in the year to date chart here goes through this weekend (Monday open).  Once again, it’s back to this line, except from above, hovering right at support.

While markets may indeed drop tomorrow, the stock market won’t likely be able to stay dropped for long.  What the market really “wants” is to try to solidly break above that 2100 line and stay there, at least for a bit, if it can.  In order for it to “give up” on that, the Mood Signal will need to solidly break below that same line.  The message for the moment is that the Mood has not done that, and won’t do so through Monday open.

MarketMood Indicator for Friday: close down.

Want to know more about what the markets might be up to next?  Go HERE.

Global Agression, Market Correction

This week looks notably bumpy, and worthy of a special public post.  As U.S. society is a part of the global system, U.S. social mood is a subset of the global mood pattern.  There is an abrupt shift (see chart below) in the U.S. pattern showing up sometime tomorrow (Tuesday).  Slight optimism becomes passion and "mild panic" (circled in the chart).  Then by Wednesday there is a sharp deflation of spirit, as the Expansion quality quickly drops below zero, and everyone holds their breath in a tension that lasts through Thursday.  The abruptness indicates that this may show up as something quite intense.  The smallness of it reflected in the U.S. mood, may indicate that the larger effect is happening somewhere else.

In addition to this abrupt shift in mood, the MarketMood weekly model is showing a brief, but possibly sharp, market correction, of up to 2% this week.  Also, the weekly social mood (not shown) shows an aggressive configuration that often goes with geopolitical escalation.  So, hang on, there may be some turbulence.