Expect the Unexpected: Outlook 14 Oct. '13

after market update: actual S&P +7.0 (+0.4%); The uncertainty and the unexpected for today so far was that there was talk of progress, but a meeting with the President was postponed, and markets went up on hope.  Will the next surprise be that a deal is made, or that there is no hope whatsoever?  Either way, markets are outpacing what social mood will support.  Something has to give.

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Overview:  A U.S. government shutdown is in day 14, and participants should be aggressively and desperately pushing their side's agendas while trying not to appear weak or vulnerable.  The mood depicted by themes in the news is uncertainty, confusion, surprise, and the perception of chaos.  The stock market may be at the beginning of a serious decline.

Today's Market Outlook is Down (-0.1% to -0.5%).  At the time of this posting, both the social mood signal and the signal from the news are negative.  The overbought condition of the market (relative to collective mood) may result in a sharper drop than indicated by the models.   
 

Near term mood outlook: The social mood pattern corresponds with aggressive, but desperate forward pushing, and trying not to appear weak or vulnerable.  It is not conducive to a genuine breakthrough in negotiations in the U.S. government impasse.  Common themes associated with the mood pattern found in the news are uncertainty, confusion,  the unexpected, chaos, protests, and terrorism.  This particular pattern also corresponds with news of unexpected, chaotic natural events such as tornadoes and earthquakes.  The combined pattern, at times, accompanies global themes of violence, instability, and terrorist activity.

 

Near term market outlook: Social mood is once again trying to break below support (see chart below).  A serious breakdown in the markets may begin at any time.

 

Longer term outlook: The social mood trend is down.  The overall market trend should be down. 

 

Today’s social mood signal is -9.5 S&P points (-8.3 S&P points for the entire weekend Saturday through Monday).  Markets tend to follow social mood more often than not. 

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Today’s news signal is -3.4 S&P points ( -1.1 S&P points for the entire weekend Saturday through Monday).  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. 

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.