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Stock Market at Major Top

You have already decided that the stock market is making a major top now.  Actually, we collectively decided this when we voted about what mattered most to us.  I'm not talking about an election.  Our choices are reflected in what we most searched for on the internet... a few months ago.

Research that spans two decades has shown that daily internet search trends are reflected in the markets a few days later and weekly search trends a few weeks later.  What was important to us on a quarterly scale, well, that will show up a few quarters later.

The source data for the fourth quarter of 2017 comes from internet search trends in the first quarter.  There were many events in the news, including the Inauguration of President Trump.  However, what matters for this purpose is what we focused on the most, not what the news media thought was important.  What we cared about, as judged by our search trends includes Melania Trump, the New Year, the Oscars, the Grammy Awards, St. Patrick's Day, the Spring Equinox, the lunar or Chinese New Year, Alabama vs. Clemson, the discovery of an exoplanet, and the death of Bill Paxton.  While none of this is directly about the market, it reflects cycles of sentiment and social mood, and this is, or soon will be reflected in the markets.

The top trends for the period under review is first converted to themes.  For example, Alabama vs. Clemson can be seen as men, sports, and schools.  After all of our trends are converted to themes they are converted to four primary mood qualities which change over time.  This is shown in the chart below:

When the purple line (Expansive) is on top, and the pink line (Vulnerable) is on the bottom, and the two are moving away from each other, that is bullish.  It reflects the very essence of "bull market."  When these lines start coming back together, it reflects a decline within a bull market.  It is clear from this, that there is a top occurring or about to occur somewhere in Q4 of 2017.

From that point it begins to get complicated.  Every so often the signals "flip," and what was positive becomes negative and vice versa.  One of these should be occurring around Q1 of 2018.  Exactly when this happens will make all the difference in the world.

No matter which way the signal is oriented, Q1 is not likely to be a pleasant period for many.  If it is oriented one way, it points to a background of international issues, people feeling extremely vulnerable or risk averse, and the government trying to prop things up.  If it is oriented the other way, it points to the primary focus being either international issues or the president (or both), a background of victims or people feeling attacked, and things in general appearing to deteriorate.  However, most of the effects of this normal or inverted mood signal in the markets should primarily be seen in Q2.

The charts below illustrate an estimated market track (dashed blue line) using the MarketMood quarterly S&P forecast as a guide.

Base case (signal flip by end of Q4 2017):

Alt case (signal flip after Q1 of 2018):

Needless to say, for the sake of the economic stability and social well-being of our world, I definitely prefer the Base Case.  Even better, that scenario is the most probable one.

At, we take internet search trends and convert them to daily and weekly forecasts in the stock market, crude oil, gold, and U.S. Dollar   These are presented and discussed in our live trading room.  You are welcome to come check it out!