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Mood Signals say Stock Market Caution!

August 14, 2013

Divergence between social mood and the stock market continues to warn of an upcoming correction.  As of today, the market would need to drop over 12% to be back where social mood indicates it “should” be.  Social mood is once again at support and testing its lows.  Will it break down over the next few days?  If so, the market would likely follow.

Today’s social mood signal is -3.4 S&P points.  In the recent sideways, uncertain pattern, social mood is at support.  The next day or two is critical to indications of a breakdown or rebound in social mood.  Since social mood breakthroughs often precede market movement, this could be indicative of the next decisive market move.
Social Mood vs. Stock Market August 14, 2013

Today’s news signal is +10.9 S&P points.  On a daily basis, news tends to follow the general trend of the market, but can either lead or lag the movement of the market.  The opposing direction in the social mood signal and the news signal for today may lead to choppy or confused moves in the market as it searches for direction.  As we’re currently in an inverted news cycle, today’s news may be perceived as moderately negative.

Near term outlook:
The social mood patterns correspond with uncertainty and the unexpected.  Common news events associated with current patterns are violent protests, terrorism, and other anti-establishment violence.  Also, events that portray a theme of surprise and the unexpected, fires, and explosions.

The “week-ahead” social mood chart shows that the recent small bounce in social mood is flattening out and has turned down slightly, corresponding to a rate of -1 S&P points per week.  Bulls should be extremely cautious as there is a high negative tension (-15%) between where social mood is and where the market is.

The Like the MoodCompass Project on undefined.

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