This week we saw the markets once again hit unprecedented highs despite Japan officially falling into a recession. When you’re in the driver’s seat, sometimes it feels like those traditional macro-economic indicators are having little effect in forecasting our own markets… so how do we keep our sanity?
The Marine Corps taught me to always stick to my training and heed the guidance of those who had gone before me in order to get through tough situations. A common adage I would hear at least once a week in briefings was: “Don’t reinvent the wheel,” which was great advice when given a monumental task.
However, we all know that every great leader always figures out a way to put their own mark on a plan, which leads to their true success.
I believe when going into unchartered territory and there is no clear map ahead, the best course of action uses what you know at your core. You should utilize the basic tools and tricks that gave you success in the past. And here’s the clincher — what sets apart the good ones from the great ones in those uncertain times, are those truly willing to embrace their core and then, double down when refining the game plan.
Last week, I introduced the concept of looking at what happened during the entire game (quarter), instead of just the final score (earnings). Building upon this same foundation, I want you to embrace your existing strategy. Have confidence in it but seek additional and complementary components to turbo charge it.
The top complementary indicator I’ve utilized over the past several years is social media analytics for short-term forecasting over a period of 60 to 90 days. When we roll up 2.4 million financial chat messages per day, we’re able to see patterns between individual stock price movement and indicators such as changes in chat message volume and message sentiment (buy/hold/sell).
For the market as a whole, we also pick up positive and negative signals based upon sentiment changes in the messages that have been extremely accurate this past year. Between January and September this year we had seven out of eight negative indicators predict the market dipping 2% to 3% in the following four weeks.
In late October we received two more negative indicators and a third on November 17. If you balance out your existing successful strategy with complementary indicators, such as social media analytics, it will greatly enhance your vision into this current market.
As always, I will continue to monitor the market’s social media collective intelligence and keep you updated on the latest trends.
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