Social Mood and Stock Market Abnormally MANIC!

Social mood (as well as the stock market) has ups and downs, but arising in the last couple of days, a MANIC spike is concerning.  The chart below shows a normal range of ups and down in social mood factors since August.  The spike showing up is clearly NOT NORMAL.  Manic mood often accompanies instability, protests, and sometimes terrorist activity.  A "crazy" news event of some type is likely.

 

Update: 31 Oct 2015 Russian jet downed by ISIS That definitely is Not Normal and terrorist activity.

 

(click to enlarge)

 

The stock market is clearly overly excited as well.  The daily social mood signal is at resistance and doesn't seem to be able to break through.  The stock market has continued to move higher in spite of the anxiety the public is experiencing. Either people are about to be feeling a whole lot better, or the market is going to hit a wall.

 



(click to enlarge)

U.S and Global Trends, Remainder of 2014

In January, we published a summary of expectations for 2014.  Using a translation of then available social mood data into cyclical projections for the upcoming year, we filled in the blanks with a best-guess narrative for 2014.  The data showed a large spike in oil/fuel prices in March and April, surrounding an international crisis.  There were indications that the Iran negotiations could run into difficulty.  We put those together in our narrative.  The actual picture was much more complex, with several new situations.  In March and April the Ukrainian crisis was accompanied by an increase in oil/gas prices and volatility of global markets. In fact, on March 2, from our daily data, we were able to announce as imminent, a large international crisis impacting the U.S. only a few hours before news broke about Ukraine and possible Russian involvement.

The global situations continued to unfold.  In June, ISIS was an issue, and the continued stability of Iraq was a concern.  Social mood data continued to lack the signs of full relief and release that would indicate things might settle down for more than a moment.  In our last post (August 7), our conclusion was that these waves of global disasters were not finished.  We stopped posting after that.  What more could we keep saying that would be of any use?  Why continue to drone on with "more disasters to come?"  On September 29, a reader commented, asking for an update.  We decided to oblige.

Looking back at the data we had at the beginning of the year, we can now add to the narrative, as many of the details surrounding context has been filled in (Undoubtedly, there are also new surprises yet to come). 

Our forecast for the stock market (S&P) for the year was near unchanged.  Based on that, in our January presentation we said not to worry about a total market meltdown, and assured the Fed would do what it needed to keep the market at least near unchanged.  At this point, with the market still up about 5% for the year, many different scenarios could result in ending the year with the market near 1850.  One of those would include a sharp drop (crash) and modest recovery.  Another is a large rally followed by a sharp drop.  Another would be a slow meltdown from current levels.  No matter how we get there, the expectation is that we end the year somewhere near 1850.

Health issues came up in our data for the year, but we decided not to emphasize this point.  We mentioned in the summary that it would be a good idea to get rest, exercise, eat healthy, etc.  Six months ago, the data started showing signs of an approaching epidemic affecting the U.S.  As we saw stories of Ebola in West Africa, we were quietly crossing our fingers that this had nothing to do with the U.S. indicators (what could we say, and to who?).  As of a few days ago, Ebola arrived in the U.S.   If the data reflected actual likely U.S. numbers of Ebola cases, this would not be anything like the plague in fatalities, but would definitely cause people to be concerned, possibly changing behaviors in public places.  It is likely that there would be quite a few more cases (more than double digits) before this is over.

Finally, a major turning point was mentioned in the summary occurring shortly before the November elections in the September/October timeframe.  We are in the midst of this now.  During this period, the focus of the U.S. government (and people) shifts from international issues to domestic issues.  There is not a lack of international issues, but a shift of priorities.  Economic concerns should increase,  and possibly other matters of a domestic nature.  Also mentioned in the summary, is that incumbents are not likely to do well in the elections.  These internal issues are the reasons why.  As the year comes to a close, the U.S. may also look more weak or vulnerable to the rest of the world than it has for some time.  This may be due to the issues now beginning to come into focus.

On the positive side, there is a better chance than there has been all year, for diplomatic agreements to be reached in November or December.  It will be seen how this affects dealings with Iran, Russia, and China in the coming months.

The Next Crisis Wave Approaching?

(click to enlarge)

Back on 24 February, we posted our observation that globally, the risk for violence and war was on the rise.  It seemed somewhat preposterous, as the news was all about diplomacy and cooperation (Iran negotiations, Syria destroying weapons, etc.).  Yet, that is what the patterns in social mood were displaying.

On 28 February, we posted World in Crisis, U.S. government and people not immune.  Hours later, the Ukraine crisis was in the news.  There were indications in our data of an approaching major disaster in scale, but little to no U.S. casualties were projected as likely accompanying this.  For that reason, we called it a crisis, not a disaster.  Also, from the social mood pattern, we determined the type of crisis projected is type NE.  From the post: "The most likely types of events that show up with type NE are an economic disaster, an attack from another geopolitical entity, or if a natural disaster, a winter storm.  It’s also associated with anxiety and risk aversion."

By 5 March, we noticed that the charts were showing that this crisis had still not had a substantial U.S. impact, and did not get the telltale "disaster pressure" relief indicated by orange lines on the chart above.  We posted the date information of 6-13 March as the likely time-frame for this.  During the period of 7-14 March, markets were down in what may be the initial warnings of a much larger decline.  The relief of "disaster pressure" has shown up in the charts, yet the crisis is not over, nor has it yet had a substantial U.S. impact.  During the time period under watch, background disaster-type events were showing up, yet they were not of major U.S. impact: a Malaysian airliner disappeared over the ocean, a U.S. building exploded from a gas leak, several people were killed when someone crashed their car into a stage, and earthquakes in Northern and Southern California not causing much damage, but causing concern and making headlines nevertheless.  The scale of all of these events appear to be "disaster precursors."  They show up near major disasters or crises, but aren't the main event.  For this reason, we have colored the area of 7-14 March yellow on the chart.

If there are much larger U.S. impacts still developing in this very complex pattern, we would expect the line on the chart to turn up over the next few days, and to remain above the horizontal black line at the right side of the chart.  Things would tend to get really bad as the curve reached its top again, likely in another week or two.  Stay tuned.