Tracking Sentiment with Google Trends

Here’s an interesting way to measure the general mood of the public towards the stock market: look at the frequency and trend of searching for related keywords. For example, “bull market” or “bear market”. Although not everyone knows that nomenclature. How about “stock market crash”? Everyone knows what that means.

Thanks to a new service from Google (GOOG) called Google Trends we can look at the popularity of various searches over time and even across different geographic areas. Persevering readers might remember that we first looked at this new measure of sentiment back in January 2008: Hunting For Sentiment Data.

Since then we’ve continued to collect data for this so here’s an updated chart comparing that Google Trend to the S&P 500 Index (SPX):

There was a massive spike which corresponds to October 5th 2008 as the stock market was barreling down head first. There was a smaller spike which corresponds to the March 2009 low.

Other than that I can’t see a clear relationship between the two. Perhaps we need more data or perhaps the keyword isn’t the right one. I’m sure one of you out there who is more statistically inclined can take the data and hash something out. If you’re interested, drop me a note and I’ll forward you the spreadsheet.

In any case, looking at the most recent data not very many people are concerned about a stock market crash. The recent numbers shows the kind of apathy last seen August 17th, 2008 and December 23rd, 2007.

Comments

[Ryu Mei Co:]

This could be interesting. Google has lots of raw data and all it needs is a "special" team to put them into good use.

By the way, your chart link is broken.

Jul 01 11:17 AM

[Mayer Amsch...:]

First of all, everyone report that comment above me. The guy's a spammer.
Secondly, great idea. Not to time trades with, but you can see what various parts make up a trend. For example, you can chart the trends for search terms like: China, inflation, oil, market crash, and depression, and superimpose them onto a chart of GLD or TLT.

Jul 01 10:04 PM