Freaking Out ‘N Moving On: Jan 21-27 2017

There’s a new U.S. President in town.  Some people are excited, and some are really quite upset.  A great tension has built up since Election Day surrounding the beginning of Donald Trump’s term.  This build up of foreboding and impending doom even showed up in the weekly top internet search trends that we track and analyze, and was discussed in last week’s post.  This tension is about to be released.

The chart below shows the ups and downs of the four primary mood qualities that all search trends are converted to in our analysis (for whatever reason, what we collectively focus on, i.e. the search trends, shows up in the news, the markets, and general ambience about three weeks later).  The gray line (Controlled) goes steadily up from early November to Inauguration Day and then drops off sharply over the next two weeks.  That sharp drop and its reverberations should be visible this week in the news cycle, in the stock and commodities markets, and the overall mood.



Another part of the analysis is identifying the patterns that show up.  Two have been identified for this week.  First there is a pattern that is associated with high emotions, passion, and panic which began last week and completes this week.  The second is a pattern which is directional, forward moving, and generally optimistic.  This begins sometime this coming week and continues into the following week.

In our members’ trading room at MarketMood.net we also translate these patterns into market forecasts for the coming days and weeks.  Undoubtedly, the coming week should be topsy turvy and highly volatile as one pattern completes and the other begins.  Hang on to your hats!

End of the World as we know it: Jan 14-20, 2017

The Obama administration is coming to an end.  While some may be celebrating, for others it might as well be the end of the world.  In tracking the weekly changes in social mood, I've noticed a slow and steady increase in a somber and foreboding mood quality since the U.S. presidential election.  The good news is that it reaches a peak in the coming week, and then drops off sharply.  The bad news is that it reaches a peak in the coming week.

For whatever reason, the things we focus on as a society show up in the stock market, in the news, and in the general ambience of our lives shortly after.  We know this because the hottest daily internet search trends contain information about what the markets are going to do, and the types of news stories that could come up about three days later.  When we look at the mood qualities found in the search trends on a weekly basis, these qualities show up in the markets, the news, and in general, about three weeks later.

I find it fascinating that as we come upon this ending of a way of being in America, and how America conducts itself, that the data I'm looking at for this week of endings is the last week of 2016-- another ending.  There was a lot of loss in that week.  The biggest search trends focused on two amazing women, Carrie Fisher and Debbie Reynolds, a famous mother and daughter who both died only a few days apart.  Other public figures lost that week, which were also among the top trends, were George Michael and Ricky Harris.

It makes sense that if all that went on that last week of 2016, which in kind is to somehow become a part of this last week of the Obama presidency, that this would be a time for grief and trepidation.  Yet, as uncertain as it is, the "New Year" comes and we adjust to what is.  This chart (below) shows the four mood qualities that I track.  If you look at that gray line (Controlled) that steadily and unusually rises since early November, you will see that it sharply drops after this week.  That represents this extremely serious and foreboding mood ever increasing from election day through Inauguration day.  Another interesting thing about this coming week is the overlay of the purple line (Expansive) and the gray line (Controlled).  This is associated with strong emotions, irrational behavior, and panic responses.



With all the uncertainties in getting a new president, especially this one, it's not surprising to see this about next week.  It's fascinating that this information came from events we Googled about three weeks ago.  It may also not be surprising that markets could be quite sensitive and make large swings in either direction (panic responses) with little stimulus in this last week of a somewhat known quantity.  This is a week when "fear itself" may be the greatest adversary to stability.  We will be closely watching the daily signals in our member trading room at MarketMood.net.

When I find myself experiencing this dread of the unknowable and unpredictable dawn of Orange America, I remind myself that I don't need to get wrapped up in it.  What is happening is; and even if it's the end of an era, or the end of a world, I can remind myself of the detached wisdom of R.E.M.: "It's the end of the world as we know it, and I feel fine."

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.