Look Ahead: Next Week Could Change Everything

At the end of September, I wrote about guaranteed surprises in October.  It was explained that there were detectable "October surprises" in store for the American people and perhaps the world at large. This was stated with the same assurance that allowed posting about an "Unprecedented Global Crisis” in February and March even as 2019 was yet finishing up and Covid-19 still unheard of.  It was detected using the same method that revealed that an intensive crisis intervention effort by the government was seen for April and May to prop up markets and stem the effects of the crisis before the month of March had even completed its first week.  And now I have some breaking news for you.  The month of October isn't over yet.  

Just as the month began, there was a surprise of a serious nature as it was announced that President Trump had contracted the coronavirus as well as a number of people in his inner circle.  Yet, there was an additional surprise of a much lighter tone when that same 74 year old, somewhat overweight President emerged from the hospital energized and ready to resume campaign activities.  As explained in my previous article, the tone of October matters a great deal.  How the month of November is experienced, and perhaps the results of the election itself may well depend on it.  Yet, before going further I should briefly review how this information is obtained.

For whatever reason, the themes of what we are collectively looking at, our social focus, resonates with the themes that show up in the news as well as market behavior shortly afterwards.  By collecting information about these themes from top internet searches (where we are looking), we can get a picture of the general types of events in the news as well as likely market conditions days, weeks, or months ahead.  This has been demonstrated time and time again.

The source data for the month of October, the themes of top searches from a few months earlier, came from quite a few topics of a serious nature.  This was the month John Lewis died, as well as the tragic drowning of Naya Rivera.   Well-known actor John Travolta was a top trend, but not for a celebration of a latest film.  It was due to the passing of his wife.  Herman Cain, a former presidential candidate also passed at this time.  When all of the themes for the period are coded into eight categories and the relative amounts in each category are added together this results in the spaghetti-like chart below:

Normally, the pattern showing for October would reflect somber themes and profound change, such as “9/11” at which time the United States before and after was forever different.  This pattern often accompanies mass casualty events or times that well-known people die.  However, this year so far has been in an inversion period where the social mood picture and its expected effect are opposite from normal.  Should this inversion continue, October’s anticipated themes would include uncertainty, surprises, inflation, giddiness, instability, protests, and in this particular variant of the pattern, some increased risk of violence.  I can't say at this point that I'm convinced that the inverted picture is playing out.  Further, a weekly zoom in (see chart below) points to the next week or two likely to be in alignment with the more serious interpretation.

While at any other time I would be bracing for an unprecedented mass casualty event with these mood signatures, I am seeing another possibility in this unique moment and will hope and cross my fingers that this is what we are looking at here.  As I was watching news coverage of the first day of early voting in Texas the other day, a woman being interviewed explained why she was willing to wait in line for twelve hours to vote, "I'm voting like my life depends on it."  I can't remember another election where so many people have felt this way, and that might also explain the number of prominent republicans that have been willing to break ranks to join with The Lincoln Project and similar organizations.  Yet, it's not all one-sided.  There are a number of Trump supporters who are very serious as well, and even if they don't see their lives as depending on the election in a literal sense (although some may see it that way as well), many do see their way of life, and the identity and future direction of their country as hinging on who wins in a way that feels like life or death.  There is one more possibility I can think of that fits the mass casualty pattern without what is usually associated with "mass casualty event"-- an unusually large or significant spike in Covid-19 cases or deaths.

It would not be a stretch to say that the election hinges on the next two weeks as most people are likely to vote this year prior to November 3rd.  If October turns out to be on the more serious path, we will find out shortly.  The good news is that the pattern for November would imply an "optimistic new chapter" for America and possibly the world at large if this is the case.  If the previous inverted mode continues throughout October it will continue through November.  In this case, the theme for November would instead be "government related instability." 

There is one more possibility, and what we've seen from October so far would support that.  There is an Elliott Wave stock market pattern called a diagonal, and this is an example of where mood and market and news all connect together.  When one of these are playing out, aspects of both the normal and inverted mood patterns show up in news themes.  For this to encompass an entire month (or more) it would have to be of a really large degree and we might not even be able to tell it was playing out until months after the fact.  However, because of the weekly pattern, I do think there's a good chance to get a clear picture of which path we are on in the next week or two-- i.e. prior to election day.

If you have found this article of interest, you might enjoy checking out our posted market outlooks in the MarketMood section at Elliott Wave Trader.  The MarketMood algorithm takes the source internet search trend data and converts that into expected market movement for the stock market, gold, oil, and the U.S. Dollar.  Information filled reports are posted daily, and additional bigger picture reports and updates are posted as needed.