Outlook 6 December '13

after market update: actual S&P +20.1 (+1.1%).  As was mentioned in yesterday's after market update, a large move in the markets was imminent.  The divergence between overall mood and market movement indicated either a large move up in the markets or a sharp move down in mood.  Since mood normally precedes market, a rally was most likely (thus today's comment about a likely bounce).  Overall mood trend is still down at this point, so whatever takes place over the weekend will be key to near term market trend.

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Overview: Social mood is reflecting a refusal to be deluded with too much hopefulness.  Themes in the news reflect general "bad news."  According to mood content, markets should be down, however according to today's signals, markets are likely to range from little changed to slightly up.  There is a high degree of uncertainty about today's market direction.  The high divergence that has been building between mood and market over the last few days may give markets a bounce.

Today's Market Outlook is slightly up to moderately up (+0.1% to +0.3%).  Both the social mood signal and the signal from themes in the news are up.  The projected stock market change for today is shown in the chart below.

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Near term mood outlook: refusal to be deluded with too much hopefulness.  Themes in the news reflect general "bad news."  The combined pattern of news and social mood reflects a high global risk of violence, protests, and a high risk of terrorist activity (yesterday's events in Yemen are an example: 52 die as militants storm Yemen defence complex).  

 

Near term market outlook: The social mood signal is indicating a serious downturn in social mood that is likely to be followed by the markets.  However, the social mood signal is now reaching its next support level.  A market bounce might try to take place here.

 

Longer term outlook: The overall social mood trend has been in what appears to be a topping process for many months.  There are no clear signals that this process will be over anytime soon.  Yet, a sharp market drop of more than 15%, likely within the next few months, is indicated by long term mood and market charts.

 

Today’s social mood signal is +2.4 S&P points as of the time of this posting.  On a daily basis, markets tend to follow social mood more often than not. 

 

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Today’s news signal is +6.2 S&P points as of the time of this posting.  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.