Aggressive Surge Impacting Shutdown Talks: Preliminary Outlook for Monday

Over the weekend, the mood factor associated with aggressively pursuing group agendas surged in U.S. collective mood (see chart below).  It has not been this high all year.  At the same time, the capacity to understand a different point of view or pursue diplomatic negotiations is near the low for the year.  There is almost no chance of any resolution on the government shutdown anytime soon, with one possible exception.

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The only way for some type of budge in the current impasse would be for group identity to shift.  "My group" would have to include both parties.  In other words, instead of Tea Party or Democrat or anti-Obama, etc.  the majority would need to see "My group" as a larger whole, for instance, "American."  This may sound absurdly simple, but if it was that easy we would be there now.  The fastest way to get this type of shift would be to have an emergency or disaster that comes from "out there" affecting all or most Americans in some way.  This could be a human caused emergency such as a terrorist attack, a market crash, or even a natural disaster of some type.  It will be interesting if such an emergency shows up in the nick of time to create this cohesion and unity out of the chaos.  Otherwise, an agreement might have to wait until the social mood is more conducive to negotiations on its own.  It will get there at some point.

Preliminary Market Outlook: Moderately to Sharply Down
Monday's official outlook won't be released for another four hours, but here's what we got at this moment (see chart).  Social mood is near breaking down below support again.  Markets could be in for quite a tumble if nothing improves between now and Monday morning.

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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.

Trying to Ignore the Inevitable: Outlook 30 Sept '13

after market update: actual S&P -10.2 (-0.6%); Markets started down about 1%, then climbed to near unchanged and then back down in a choppy fashion.  Denial of the inevitable, and hope that there will be a last minute deal kept markets from falling further than they did.

News story that captured today's denial of irrationality theme almost exactly:  The Republicans Fighting Obamacare Aren't Crazy
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Overview:  A U.S. government shutdown appears inevitable at this point, and the strongest negative influence is coming from the high uncertainty in the news.  Social mood reflects a desperate pushing to disprove weakness or vulnerability, while the themes in the news reflect an active denial of appearing irrational or delusional.  Markets could be confused and choppy, but most likely down.

Today's Market Outlook is Sharply Down to Near Unchanged (-0.2% to -0.8%).  At the time of this posting, the social mood signal from over the weekend is slightly negative, and the signal from the news is strongly negative.  Signal momentum indicates a choppy and confused market is possible today; although most likely down.  The markets will likely stick closer to the news signal for the next few days.

 

Near term mood outlook: The social mood pattern corresponds with an agenda of disproving weakness or vulnerability.  Common themes associated with the mood pattern found in the news are uncertainty, confusion, volatility, and trying to deny or disprove irrationality.  The combined pattern, at times, accompanies global themes of violence, instability, and terrorist activity.

 

Near term market outlook: The social mood curve may be turning up.  If so, a large market bounce could be due within a few days (would that also mean a U.S. government deal could be reached this week?).

 

Longer term outlook: The social mood trend has turned down, but not definitively.  Confirmation of a continuation of the long term downtrend has not yet occurred.

 

Today’s social mood signal is -12.1 S&P points (the entire weekend signal, Saturday thru Monday, is -3.1 S&P points).  Markets tend to follow social mood more often than not.  Signal is near support, the next few days are critical to direction. 

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Today’s news signal is +3.5  S&P points (entire weekend signal, Saturday through today, is -13.2 S&P points).  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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Today's expected stock market range is calculated as -3.1 S&P points (weekend social mood signal) or -13.2 S&P points (weekend news signal)  -0.2% to -0.8%.  

As News Deteriorates, Markets are Heading over the Cliff

Various pundits say the U.S. budget and debt limit crisis could affect the markets and possibly unravel the fragile economic recovery that apparently is on its way.  If Monday's preliminary collective mood charts are even close to the final version we will publish in about 18 hours, there could definitely be a problem. 

Our preliminary charts for Monday show a plunge in the mood reflected by the news.  They also show social mood dipping below support.  Does this mean a sharp market drop is at hand?  On Friday, in our after market notes, we shared this: "If both the mood and the news go south over the weekend, that could spell big trouble next week."

Hmmm...

Below are the preliminary charts for Monday.  They show a 1-2% drop is possible on Monday.  The news chart is pretty ominous looking, but the top one, the social mood chart is actually hopeful, as it is bad but not terrible.  As that will be behind the decisions made, and it hasn't solidly broken down, markets may hang in there and not drop precipitously.  Perhaps there is even a chance for a last minute deal.  Stay tuned for the final chart early Monday morning.

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Riding the Budget Roller Coaster: Outlook 27 Sept. '13

after market update: actual S&P -6.92 (-0.41%); Markets started with a big drop and spent the rest of the session choppy and sideways.  The Nasdaq was positive for part of the session, but the DOW and S&P stayed negative.  For today, the news weighed more heavily than the mood.  Yet, the "gotta  keep pushing, gotta stay hopeful" mood likely prevented the markets from falling more than they did.

If both the mood and the news go south over the weekend, that could spell big trouble next week.
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Overview:  Although it looks unlikely at this point that the government will be able to work things out in time to avoid either a shutdown or default, people in general don't seem to be excessively worried about it right now.  Social mood reflects desperate pushing towards competing goals.  This, combined with the high uncertainty in the news, could leave markets rallying one minute only to fall in the next.

Today's Market Outlook is Mixed to Up (-0.1% to +0.7%).  At the time of this posting, the social mood signal is positive, yet the signal from the news is slightly negative.  Signal momentum indicates a choppy market is likely today as competing forces vie for control.  Watch for news events to impinge on any rallies that may develop.

 

Near term outlook: The social mood pattern corresponds with desperately pushing toward a goal (and competing with others pushing toward other goals).  Common news themes associated with the current news mood pattern are uncertainty, confusion, and volatility.  The combined pattern, at times, accompanies global themes of violence, instability, and terrorist activity.

 

Longer term outlook: The social mood trend has turned down; the bounce over the last month appears to be complete.  However, confirmation of a continuation of the long term downtrend has not yet occurred.

 

Today’s social mood signal is +13.2 S&P points.  Markets tend to follow social mood more often than not.  Signal is at support, the next few days are critical to direction. 

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Today’s news signal is -0.2 S&P points.  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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