Disaster or Terrorist Activity?- Something Big is Near: Outlook 30 Oct. '13

after market update: actual S&P -8.7 (-0.5%); Markets did turn down today, accelerating after the FOMC meeting as bonds sold off and interest rates climbed.  The "disaster or terrorist activity" may be later this week.

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Overview: Social mood appears to be deteriorating, and reflects both aggressiveness and instability.  The themes in the news are associated with the perception of destruction, deterioration, or disaster.  Mood is turning sharply down, markets are likely to follow.  Whether it happens today, or in a few days, something abrupt and tragic is near.

Today's Market Outlook is turning down to sharply down (-0.1% to -1.1%);  While the news signal is near unchanged at the time of this posting, the social mood signal is sharply down.

 

Near term mood outlook: The social mood pattern corresponds with violence and instability.  The mood themes found in the news are associated with destruction, deterioration, or disaster.  The combined pattern of news and social mood, at times, accompanies global themes of violence, protests, and terrorist activity.  An abrupt change and something of a tragic nature is indicated as a highly likely occurrence.

 

Near term market outlook: The social mood signal is turning down from the resistance area (see this post for more info).  Markets should either pause or turn down sharply from here.

 

Longer term outlook: The overall social mood trend has been in what appears to be a topping process all year.  There are no clear signals that this process will be over anytime soon.  Yet, a sharp drop of more than 10%, just around the corner, is indicated by long term mood and market charts.

 

Today’s social mood signal is -18.3 S&P points as of the time of this posting.  Markets tend to follow social mood more often than not. 

 

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Today’s news signal is -0.9 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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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. 

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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